Holding

The appellant discharged the burden of proving that the cheques were not issued for the discharge of any debt, thereby overturning the conviction and restoring the acquittal.

Summary

The respondent alleged that it sold woolen carpets to the appellant and that the appellant issued two cheques which were later dishonoured, leading to a complaint under Section 138 of the Negotiable Instruments Act. The appellant contended that the cheques were advances for a purchase that never materialised and that no sale or debt existed. Evidence showed that the bill of sale was unsigned by the appellant, the sales‑tax department confirmed no carpet transaction in the relevant assessment year, and the respondent produced no account books or delivery acknowledgements. The Supreme Court held that the appellant had successfully rebutted the statutory presumptions under Sections 118 and 139, shifting the burden back to the complainant, who failed to prove a debt. It also ruled that the High Court erred in remitting sentencing to the magistrate after conviction. Consequently, the conviction was set aside and the trial court’s acquittal restored.

Issues considered

The applicability and rebuttal of the presumptions under Sections 118 and 139 of the Negotiable Instruments Act in a Section 138 case.
Whether the respondent proved the existence of a debt or liability discharged by the cheques.
The procedural propriety of a High Court remitting sentencing to a magistrate after convicting under Section 138.

Legislation cited

Code of Criminal Procedure, 1973s. 386
Indian Evidence Act, 1872s. 114, s. 3, s. 4
Negotiable Instruments Act, 1881s. 118, s. 138, s. 139

Subjects

Negotiable Instruments ActSection 138PresumptionBurden of proofCheque dishonourContractual considerationCriminal appealSentencing jurisdictionAppellate court powers

Judgment

[2008] 17 S.C.R. 572

A MIS. KUMAR EXPORTS
v. r "'
M/S. SHARMA CARPETS
(Criminal Appeal No. 2045 of 2008)
DECEMBER 16, 2008
B
[R.V. RAVEENDRAN AND J.M. PANCHAL, JJ.]
,..t.
Negotiable Instruments Act, 1881:
ss. 118 and 139 - Special rules of evidence relating to
c presumptions, when negotiable instrument is the subject
matter - Presumptions under ss. 118 and 139 - Scope and
ambit of - Explained and elucidated - Evidence Act, 1872 -
ss.3,4
,
and 114.
s. 138 - Dishonour of cheque - Case of respondent
D (complainant) that it sold carpets to appellant and in discharge
of said liability, appellant issued cheques, which were
dishonoured - Defence of appellant that it agreed to purchase +
carpets from respondent and issued cheques by way of
advance but respondent did not supply the carpets - Held:
.E Bill produced by respondent did not bear signatures on behalf
of appellant - On the contrary, from testimony of a sales ta)f
official, it was evident that no transaction of sale of carpets
took place between respondent and appellant- Consequently,
there was no existing debt in discharge of which, appellant was
expected to issue cheques to respondent - Under the
F circumstances, defence of appellant that blank cheques were +
obtained by respondent as advance payment also became
probable and onus of burden shifted on respondent -
Respondent did not produce any account books etc. to
establish that carpets were sold by it to appellant -
G Consequently, appellant entitled to acquittal as it discharged
the onus of proving that the cheques were not received by the
holder for discharge of a debt\ or liability.
+-
Code of Criminal Procedure, 1973 - s.386 - Trial ul
s. 138 of NI Act - Acquittal of accused - Appeal - High Court.
H 572
MIS. KUMAR EXPORTS v. MIS. SHARMA CARPETS 573

reversing the acquittal - Remitting the matter to trial court for A
passing appropriate order of sentence - Propriety of - Held:
,. ~
Not proper - Judicial function of imposing appropriate
sentence can be performed only by Appellate Court when it
reverses the order of acquittal and not by any other court - It
was the bounden duty of High Court to impose appropriate B
sentence commensurate with the facts of the case -
Negotiable Instruments Act, 1881 - s. 138.

lo..
Appellant faced trial under s.138 of the Negotiable
Instruments Act, 1881. It was the case of the respondent
(complainant) that it had sold woollen carpets to the c
accused-appellant and in discharge of the said liability,
the appellant had issued two cheques, which were
ultimately dishonoured.
The defence of the appellant was that it had agreed
to purchase woolen carpets from the respondent and had D
issued the cheques by way of advance but the
respondent did not supply the carpets.
The trial court acquitted appellant holding that it was
not proved by respondent that cheques were issued by
appellant for discharge of a debt or liability. On appeal, E
High Court held that if the defence put forth by appellant
was true, it would have issued instructions to 'stop
. payment of cheques' instead of allowing them to be
presented and dishonoured and accordingly reversed the
acquittal of appellant and thereafter remitted the matter
back to the trial court tp pass an appropriate order of F
~ sentence. Hence the present appeal.
Allowing the appeal, the Court
HELD:1.1. In a suit to enforce a simple contract, the
plaintiff has to aver in his pleading that it was made for G
good consideration and must substantiate it by evidence.
But to this rule, the negotiable instruments are an
exception. In a significant departure from the general rule
·- r applicable to contracts, s.118 of the Negotiable
Instruments Act, 1881 lays down some special rules of
H
574 SUPREME COURT REPORTS
e
[2008] 17 S.C.R.-

A evidence relating to presumptions. The reason for these
presumptions is that, negotiable instrument passes from
and to hand on endorsement and it would make trading
very difficult and negotiability of the instrument
impossible, unless certain presumptions are made. The
B presumption, therefore, is a matter of principle to facilitate
negotiability as well as trade. [Para 9] [581-G-H; 582-A-C]
1.2. S.118 of the Act inter alia directs-that it shall be
presumed, until the contrary is proved, that every
negotiable instrument was made or drawn for
c consideration. S.139 of the Act stipulates that unless the
contrary is proved, it shall be presumed, that the holder
of the cheque received the cheque, for the discharge of,
whole or part of any debt or liability. Applying the
definition of the word 'proved' in s.3 of the Evidence Act
to the provisions of ss.118 and 139 of the Act, it becomes
D evident that in a trial under s.138 of the Act a presumption
will have to be made that every negotiable instrument
was made or drawn for consideration and that it was
executed for discharge of debt or liability once the
execution of negotiable instrument is either proved or
E -admitted. As soon as the complainant discharges the
burden to prove that the instrument, say a note, was
executed by the accused, the rules of presumptions
under ss.118 and 139 of the Act help him shift the burden
on the accused. The presumptions will live, exist and
F survive and shall end only when the contrary is proved
by the accused, that is, the cheque was not issued for
consideration and in discharge of any debt or liability. A
presumption is not in itself evidence, but only makes a
prima facie case for a party for whose benefit it exists.
G [Para 10] [583-G]
1.3. The use of the phrase "until the contrary is
proved" in s.118 of the Act and use of the words "unless
the contrary is -proved" in s.139 of the Act read with
definitions of "may presume" and "shall presume" as
H given in s.4 of the Evidence Act, makes it at once clear
M/S. KUMAR EXPORTS v. MIS. SHARMA CARPETS 575

that presumptions to be raised under both the provisions A
are rebuttable. When a presumption is rebuttable, it only
points out that the party on whom lies the duty of going
forward with evidence, on the fact presumed and when
that party has produced evidence fairly and reasonably
tending to show that the real fact is not as presumed, the 8
purpose of the presumption is over. The accused in a trial
under s.138 of the Act has two options. He can either
show that consideration and debt did not exist or that
under the particular circumstances of the case the non':"
existence of consideration and debt is so probable that C
a prudent man ought to suppose that no consideration
and debt existed. To rebut the statutory presumptions an
accused is not expected to prove his defence beyond
reasonable doubt as is expected of the complainant in a
criminal trial. The accused may adduce direct evidence
to prove that the note in question was. not supported by D
consideration and that there was no debt or liability to be
discharged by him. However, the court need not insist in
every case th.at the accused should disprove the non-
existence of consideration and debt by leading direct
evidence because the existence of negative evidence i~ E
neither possible nor contemplated. [Para 11] (583-H; 584-
A-E]
1.4. At the same time, bare denial of the passing of
the consideration and existence of debt, apparently
would not serve the purpose of the accused. Something F
which is probable has to be brought on record for getting
the burden of proof shifted to the com·plainant. To
disprove the presumptions, the accused should bring on
record such facts and circumstances, upon
consideration of which, the court may either believe that G
the consideration and debt did not exist or their non-
existence was so probable that a prudent man would
under the circumstances of the case, act upon the plea
that they did not exist. Apart from adducing direct
evidence to prove that the note in question was not
supported by consideration or that he had not incurred H
576 SUPREME COURT REPORTS (2008] 17 S.C.R.

A any debt or liability, the accused may also rely upon
circumstantial evidence and if the circumstances so
relied upon are compelling, the burden may likewise shift
again on to the complainant. The accused may also rely
upon presumptions of fact, for instance, those mentioned
8 in s.114 of the Evidence Act to rebut the presumptions
arising under ss.118 and 139 of the Act. The accused has
also an option to prove the non-existence of
consideration and debt or liability either by letting in
evidence or in some clear and exceptional cases, from
the case set out by the complainant, that is, the averments
C in the complaint, the case set out in the statutory notice
and evidence adduced by the complainant during the
trial. Once such rebuttal evidence is adduced and
accepted by the court, having regard to all the
circumstances of the case and the preponderance of
D probabilities, the evidential burden shifts back to the
complainant and, thereafter, the presumptions under
ss.118 and 139 of the Act will not again come to the
complainant's rescue. [Para 11] [584-F-H; 585-A-C]
2.1. In the present case, in support of his case, the
E respondent produced the carbon copy- of the bill. A
perusal of the bill makes it evident that there is no
endorsement made by the respondent accepting the
correctness of the contents of the bill. The bill is neither
signed by the appellant. On the co~1trary, the appellant
F examined one official from the Sales Tax Department,
who positively asserted before the Court that the
respondent had filed sales tax return for the Assessment
Year 1994-95 indicating that no sale of woolen carpets
had taken place during the said Assessment Year and,
G therefore, sales tax was not paid. The said witness also
produced the affidavit sworn by the respondent
indicating that during the year 1994-95 there was no sale
of woolen carpets by the respondent. Though the
complainant was given sufficient opportunity to cross-
examine the said witness, nothing could be elicited
H
.. M/S. KUMAR EXPORTS v. MIS. SHARMA CARPETS 577

during his cross-examination so as to create doubt about A
" -1 his assertion that no transaction of sale of woolen carpets
/
was effected by the respondent during the year 1994-95.
[Para 12] [585-E-H; 586-A]
2.2. Once the testimony of the official of the Sales Tax
Department is accepted, it becomes evident that no B
transaction of sale of woolen carpets had taken place
between the respond~nt and the appellant, as alleged by
...... the respondent. When sale of woolen carpets had not
taken place, there was no existing debt in discharge of
-I
which, the appellant was expected to issue cheques to c
-- the respondent. Thus the accused has discharged the
onus of proving that the cheques were not received by
the holder for discharge of a debt or liability. Under the
circumstances the defence of the appellant that blank
cheques were obtained by the respondent as advance
payment also becomes probable and the onus of burden D
would shift on the complainant. The complainant did not
~
produce any books of account or stock register
maintained by him in the course of his regular business
or any acknowledgement for delivery of goods, to
establish that as a matter of fact woolen carpets were E
sold by him to the appellant for a sum. Having regard to
the materials on record, the respondent failed to establish
his case under s.138 of the Act. The judgment rendered

- ~
by the High Court convicting the appellant under s.138
of the Act, is therefore set aside and judgment rendered
by the Judicial Magistrate I Class, acquitting the appellant,
is restored. [Paras 12 and 14] [586-A-E; 587-D-E]
F

3. Besides, the High Court, after convicting the
appellant under s.138 of the Act, remitted the matter to the
Magistrate for passing appropriate order of sentence. G
This course, adopted by the High Court, is unknown to
law. It was was hearing an appeal from an order of

...
•
..... ~ acquittal. The powers of the Appellate Court, in an appeal
from an order of acquittal, are enumerated in s.386(a) of
the Code of Criminal Procedure, 1973. Those powers do
H

....,.I
578 SUPREME COURT REPORTS [2008)17 S.C.R.
e
'!-

.__
A not contemplate that an Appellate Court, after recording r

conviction, can remit the matter to the trial court for ,. v
passing appropriate order of sentence. The judicial ..
'>~

'
function of imposing appropriate sentence can be •
performed only by the Appellate Court when. it reverses
B the order of acquittal and not by any other court. Having
regard to the scheme of the Code of Criminal Procedure,
1973, after finding the appellant guilty under s.138 of the ~
Act, the judicial discretion of imposing appropriate ).
sentence could not have been abdicated by the High
Court in favour of the Magistrate. Having found the ,,f
c appellant guilty under s.138 of the Act it was the bounden
duty of the High Court to impose appropriate sentence
commensurate with the facts of the case. Therefore, the
procedure adopted by the High Court cannot be
-- 4-
l-
approved or accepted. [Para 13] [586-F-H; [587-A-B]
D CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
No. 2045 of 2008.
~
From the final Judgment and Order dated 1.2.2007 and
23.11.2006 of the High Court of Punjab and Haryana at
Chandigarh in Crl. M.C. No. 5155-56 of 2007 in Criminal Appeal '
E No. 946-SBA of 2004 and Criminal Appeal No. 946-SBA of
2004 respectively.
K.C. Bajaj, Sanjeev Malhotra, Himanshu Bajaj and Pradeep
Shukla for the Appellant.

F
Naresh Kaushik, Manish Kaushik, Arnita Kalkal and Lalita
Naresh Kaushik for the Respondent. +
...
The Judgment of the Court was delivered by ~~

J.M. PANCHAL, J. 1. Leave granted.
"'
2. The instant appeal is directed against judgment dated
G November 23, 2006, rendered by the learned Single Judge of
Punjab and Haryana High Court, in Criminal Appeal No. 946
SBA of 2004, by which the judgment dated December 6, 2003,
t -.-
passed by the learned Judicial Magistrate I Class, Kamal, in \"---
Criminal Complaint No. 178 of 2001, acquitting the appellant ·•
H under Section 138 of the Negotiable Instruments Act, 1881 ('the
M/S. KUMAR EXPORTS v. MIS. SHARMA CARPETS 579
[J.M. PANCHAL]

Act' for short), is set aside and after convicting the appellant A
~
under Section 138 of the Act the matter is remitted to the
learned Magistrate to pass appropriate order of sentence.
3. Jai Bhagwan Sharma, proprietor of M/s. Sharma
Carpets, the respondent herein, deals in carpets. Rajinder
Kumar, proprietor of Mis. Kumar Exports, the appellant herein, 8
is carrying on business at Panipat. It is the case of the
respondent that the appellant purchased handtufted woolen
~ carpets from him on August 6, 1994, cost of which was
Rs.1,90,348.39. According to the respondent, the appellant
issued two cheques, i.e., one cheque bearing No. 052912 c
dated August 25, 1994 for a sum of Rs.1,00,000/- and another
cheque bearing No. 052913 dated September 25, 1994 for an
amount of Rs.90,348.39 drawn on Panipat branch of Union
Bank of India, for discharge of his liability. The case of the
respondent is that the cheques were deposited in the bank by
him for encashment, but those cheques were received back D
unpaid with remarks "insufficient funds". It is the case of the
respondent that the fact that the cheques were dishonoured for
insufficient funds was brought to the notice of the appellant and
on the request of the appellant, the cheques were again
presented for encashment in the bank on January 5, 1995, but E
they were again dishonoured due to lack of funds in the account
of the firm of the appellant. What is claimed by the respondent
is that under the circumstances he had served statutory notice
dated January 19, 1995 calling upon the appellant to make
payment of the amount due but neither the appellant had replied F
-+ the said notice nor made payment of the amount due. The
respondent, therefore, filed Criminal Complaint No. 178 of 2001
in the court of the learned Judicial Magistrate 1st Class, Kamal
and prayed to convict the appellant under Section 138 of the
Act.
G
4. On service of summons the appellant appeared before
" the Court. His defence was that the bill produced by the
-.\ respondent indicating sale of woolen carpets was a fictitious
one and that blank cheques with his signatures were taken from
him by the respondent to enable the respondent to purchase
H
580 SUPREME COURT REPORTS [2008] 17 S.C.R.

A the raw material for him. According to the appellant the
cheques were in the form of advance payment for supply of
carpets, but the respondent had failed to deliver the goods to
him. The appellant alleged that the respondent had stopped
manufacturing carpets and as the cheques were not issued in
discharge of any liability, he was not liable to be convicted
8 under Section 138 of the Act.

5. In order to prove his case the respondent examined
himself as CW-3 and produced the cheques dishonoured at
Ex. CW-2/A and CW-2/B, statutory notice at Ex. C-4, carbon
copy of bill at CW-2/C, etc. He examined two witnesses to
C prove the presentation and dishonour of the cheques. No other
witness was examined by him in support of his case pleaded
in the complaint against the appellant. The appellant examined
himself to substantiate his defence as DW-1. He also
examined one Mr. Om Prakash, serving as a clerk in the Sales
D Tax Department, as DW-2, who stated before the Court that
the respondent's firm had filed sales tax return for the
Assessment Year 1994-95 declaring that no sale or purchase
of woolen carpets had taken place and, therefore, no sales tax
was deposited. The said witness also produced an affidavit filed
E by the respondent as Ex.D-1 wherein the respondent had
stated on oath that no sale or purchase of woolen carpets had
taken place during·the Assessment Year 1994-95.
6. On appreciation of evidence the learned Magistrate held
that the execution of the cheques was admitted by the appellant
F and that it was proved by the respondent that those cheques
were dishonoured on account of insufficient funds. However, the +
learned Magistrate concluded that it was not proved by the
respondent that the cheques were issued by the appellant for
discharge of a debt or liability. The learned Magistrate noticed
G that the bill produced at Ex. CW-2/C did not bear the signature
of the appellant as buyer to acknowledge its acceptance or
correctness. The learned Magistrate also noted that n_o
corroborative evidence in the form of account books was
produced by the respondent and it was, therefore, doubtful
whether in fact the respondent had delivered any goods to the
H
M/S. KUMAR EXPORTS v. MIS. SHARMA CARPETS 581
.. [J.M. PANCHAL]
appellant. The learned Magistrate referred to the testimony of A
witness from the Sales Tax Department and concluded that as
' ... no transaction of sale of woolen carpets was effected by the
respondent during the Assessment Year 1994-95, the defence
pleaded by the appellant was probablised. In view of above
mentioned conclusions, the learned Magistrate acquitted the B
appellant by judgment dated December 6, 2003.
7. Feeling aggrieved, the respondent preferred Criminal
Appeal No. 946 SBA of 2004 in the High Court of Punjab and
Haryana at Ch,andigarh. The learned Single Judge, who heard
the appea.1, was of the opinion that in terms of Section 139 of
c
the Act there was a presumption that the cheques received by
the respondent were for the discharge of a debt or liability
incurred by the appellant that execution of cheques was
admitted by the appellant and that the appellant did not place
material to rebut such presumption as a result of which, he was
liable to be convicted under Section 138 of the Act. The learned D
single Judge concluded that if the defence put forth by the
appellant was true, he would have issued instructions to 'stop
payment of the cheques' instead of allowing the cheques to be
presented and dishonoured. He was also of the view that the,
affidavit of complainant (appellant herein) that there was no E
transaction during 1994-95, was not a relevant circumstance.
Accordingly, the learned Single Judge convicted the appellant
under Section 138 of the Act and remitted the matter to the trial
court for passing appropriate order of sentence, after hearing
the appellant and the respondent. Feeling aggrieved, the F
appellant has approached this Court by way of filing the instant
+ appeal.
8. We heard the learned counsel for the parties at length
and considered the record of the case.
9. In order to determine the question whether offence G
punishable under Section 138 of the Act is made out against
the appellant, it will be necessary to examine the scope and
-..,' ambit of presumptions to be raised as envisaged by the
provisions of Sections 118 and 139 of the Act. In a suit to
?'
enforce a simple contract, the plaintiff has to aver in his H
582 SUPREME COURT REPORTS [2008] 17 S.C.R.
e
.. I

A pleading that it was made for good consideration and must
substantiate it by evidence. But to this rule, the negotiable
t-
instruments are an exception. In a significant departure from the '
general rule applicable to contracts, Section 118 of the Act
provides certain presumptions to be raised. This Section lays
down some special rules of evidence relating to presumptions.
B
The reason for these presumptions is that, negotiable instrument
passes from hand to hand on endorsement and it would make
trading very difficult and negotiability of the instrument
impossible, unless certain presumptions are made. The
,..
presumption, therefore, is a matter of principle to facilitate
c negotiability as well as trade. Section 118 of the Act provides
presumptions to be raised until the contrary is proved (i) as to
consideration, (ii) as to date of instrument, (iii) as to time of
--
acceptance, (iv) as to time of transfer, (v) as to order of
indorsements, (vi) as to appropriate stamp and (vii) as to holder
D being a holder in due course. Section 139 of the Act provides
that 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, of any
debt or other liability. Presumptions are devices by use of which
E the courts are enabled and entitled to pronounce on an issue
notwithstanding that there is no evidence or insufficient
evidence. Under the Indian Evidence Act all presumptions must
come under one or the other class of the three classes
mentioned in the Act, namely, (1) "may presume" (rebuttable),
(2) "shall presume" (rebuttable) and (3) "conclusive
F presumptions" (irrebuttable). The term 'presumption' is used to
designate an inference, affirmative or disaffirmative of the +
existence a fact, conveniently called the "presumed fact" drawn
by a judicial tribunal, by a process of probable reasoning from
some matter of fact, either judicially noticed or admitted or
G established by legal evidence to the satisfaction of the tribunal.
Presumption literally means "taking as true without examination ,,
or proof'. Sec~o~:1 of the Evidence Act inter-alia defines the .
,. -
words 'may pre§\ll.e' and 'shall presume as follows: -
"(a) 'may ·esume' - Whenever it is provided by this Act
.
H that the Court may presume a fact, it may either

-;;
(

M/S. KUMAR EXPORTS v. MIS. SHARMA CARPETS 583
[J.M. PANCHAL]

regard such fact as proved, unless and until it is A
disproved or may call for proof of it.
(b) 'shall presume' -Whenever it is directed by this Act
that the Court shall presume a fact, it shall regard
such fact as proved, unless and until it is
disproved." B
In the former case the Court has an option to raise the
presumption or not, but in the latter case, the Court must
necessarily raise the presumption. If in a case the Court has
an option to raise the presumption and raises the presumption,
the distinction between the two categories of presumptions c
ceases and the fact is presumed, unless and until it is
If disproved.
10. Section 118 of the Act inter alia directs that it shall be
presumed, until the contrary is proved, that every negotiable
instrument was made or drawn for consideration. Section 139 o
of the Act stipulates that unless the contrary is proved, it shall
be presumed, that the holder of the cheque received the
cheque, for the discharge of, whole or part of any debt or
liability. Applying the definition of the word 'proved' Jn Section
3 of the Evidence Act to the provisions of Sections 118 and E
139 of the Act, it becomes evident that in a trial under Section
138 of the Act a presumption will have to be made that every
negotiable instrument was mad~ or drawn for consideration
and that it was executed for discharge of debt or liability once
the execution of negotiable instrument is either proved or
admitted. As soon as the complainant discharges the burden F
to prove that the instrument, say a note, was executed by the
accused, the rules of presumptions under Sections 118 and
139 of the Act help him shift the burden on the accused. The
presumptions will live, exist and survive and shall end only when
the contrary is proved by the accused, that is, the cheque was G
not issued for consideration and in discharge of any debt or
liability. A presumption is not in itself evidence, but only makes
a prima facie case for a party for whose benefit it exists.
11. The use of the phrase "until the contrary is proved" in
Section 118 of the Act and use of the words "unless the H
'
584 SUPREME COURT REPORTS [2008] 17 S.C.R. e ~

A contrary is proved" in Section 139 of the Act read with
definitions of "may presume" and "shall presume" as given in ,....
Section 4 of the Evidence Act, makes it at once clear that r
presumptions to be raised under both the provisions are
rebuttable. When a presumption is rebuttable, it only points out
that the party on whom lies the duty of going forward with
8
evidence, on the fact presumed and when that party has
produced evidence fairly and reasonably tending to show that
the real fact is not as presumed, the purpose of the presumption
is over. The accused in a trial under Section 138 of the Act has A.

two options. He can either show that consideration and debt
c did not exist or that under the particular circumstances of the
case the non-existence of consideration and debt is so
probable that a prudent man ought to suppose that no
consideration and debt existed. To rebut the statutory
---
presumptions an accused is not expected to prove his defence
D beyond reasonable doubt as is expected of the complainant
in a criminal trial. The accused may adduce direct evidence to
prove that the note in question was not supported by
consideration and that there was no debt or liability to be
discharged by him. However, the court need not insist in every
E case that the accused should disprove the non-existence of
consideration and debt by leading direct evidence because the
existence of negative evidence is neither possible nor
contemplated. At the same time, it is clear that bare denial of
the passing of the consideration and existence of debt,
apparently would not serve the purpose of the accused.
F Something which is probable has to be brought on record for
getting the burden of proof shifted to the complainant. To
disprove the presumptions, the accused should bring on record
t •
such facts and circumstances, upon consideration of which, the
court may either believe that the consideration and debt did not
G exist or their non-existence was so probable that a prudent man
would under the circumstances of the case, act upon the plea
thal they did not exist. Apart from adducing direct evidence to
prove that the note in question was not supported by ~-
consideration or that he had not incurred any debt or liability, ....
H the accused may.also rely upon circumstantial evidence and if
M/S. KUMAR EXPORTS v. MIS. SHARMA CARPETS 585
[J.M. PANCHAL]

the circumstances so relied upon are compelling, the burden A

..
-.. -; may likewise shift again on to the complainant. The accused
may also rely upon presumptions of fact, for instance, those
mentioned in Section 114 of the Evidence Act to rebut the
presumptions arising under Sections 118 and 139 of the Act.
The accused has also an option to prove the non-existence of B
consideration and debt or liability either by letting in evidence
or in some clear and exceptional cases, from the case set out
by the complainant, that is, the averments in the complaint, the
case set out in the statutory notice and evidence adduced by
the complainant during the trial. Once .such rebuttal evidence
is adduced and accepted by the court, having regard to all the c
circumstances of the case and the preponderance of
_,. probabilities, the evidential burden shifts back to the
complainant and, thereafter, the presumptions under Sections
118 and 139 of the Act will not again _come to the complainant's
rescue. D
12. The defence of the appellant was that he had agreed
to purchase woolen carpets from the respondent and had
issued the cheques by way of advance and that the respondent
did not supply the carpets. It is the specific case of the
respondent that he had sold woolen carpets to the appellant E

..
on 6.8.1994 and in discharge of the said liability the appellant
had issued two cheques, which were ultimately dishonoured.
In support of his case the respondent produced the carbon
copy of the bill. A perusal of the bill makes it evident that there
is no• endorsement made by the respondent accepting the F
correctness of the contents of the bill. The bill is neither signed
-t
by the appellant. On the contrary, the appellant examined one
official from the Sales Tax Department, who positively asserted
before the Court that the respondent had filed sales tax return
for the Assessment Year 1994-95 indicating that no sale of
woolen carpets had taken place during the said Assessment ,G
Year and, therefore, sales tax was not paid. The said witness
also produced the affidavit sworn by the respondent indicating
.. 1 that during the year 1994-95 there was no sale of woolen
carpets by the respondent. Though the complainant was given
sufficient opportunity to cross-examine the said witness, nothing H
586
.
SUPREME COURT REPORTS [2008] 17 S.C.R. e
~

A could be elicited during his cross-examination so as to create

-
doubt about his assertion that no transaction of sale of woolen ,.;
carpets was effected by the respondent during the year 1994- r
95. Once the testimony ~f the official of the Sales Tax
Department is accepted, it becomes evident that no transaction
B of sale of woolen carpets had taken place between the
respondent and the appellant, as alleged by the respondent.
When sale of woolen carpets had not taken place, there was
no existing debt in discharge of which, the appellant was
expected to issue cheques to the respondent. Thus the accused
has discharged the onus of proving that the cheques were not
c received by the holder for discharge of a debt or liability. Under
the circumstances the defence of the appellant that blank
cheques were obtained by the respondent as advance .....
payment also becomes probable and the onus of burden would
shift on the complainant. The complainant did not produce any
D books of account or stock register maintained by him in the
course of his regular business or any acknowledgement for
delivery of goods, to establish that as a matter of fact woolen
carpets were sold by him to the appellant on August 6, 1994
for a sum of Rs.1,90,348.39. Having regard to the materials on
E record, this Court is of the opinion that the respondent failed
to establish his case under Section 138 of the Act as required
by law and, therefore, the impugned judgment of the High Court
is liable to be set aside. )-

13. This Court has also noticed a strange and very
F disturbing feature of the case. The High Court, after convicting >-
the appellant under Section 138 of the Act, remitted the matter -;-
to the learned Magistrate for passing appropriate order· of
sentence. This course, adopted by the learned Single Judge,
is unknown to law. The learned Single Judge was hearing an
appeal from an order of acquittal. The powers of the Appellate
,G Court, in an appeal from an order of acquittal, are enumerated
in Section 386(a) of the Code of Criminal Procedure, 1973.
Those powers do not contemplate that an Appellate --,Court, after .....
recording conviction, can remit the matter to the trial court for
passing appropriate order of sentence. The judicial function of
..
H
M/S. KUMAR EXPORTS v. MIS. SHARMA CARPETS 587
[J.M. PANCHAL]

imposing appropriate sentence can be performed only by the A
.._ Appellate Court when it reverses the order of acquittal and not
:
' 1 by any other court. Having regard to the scheme of the Code
of Criminal Procedure, 1973 this Court is of the view that after
finding the appellant guHty under Section 138 of the Act, the
judicial discretion of imposing apptopriate sentence could not
B
have been abdicated by the learned Single Judge in favour of
the learned Magistrate. Having found the appellant guilty under
Section 138 of the Act it was the bounden duty of the High Court
to impose appropriate sentence commensurate with the facts
of the case. Therefore, we do not approve or accept the
procedure adopted by the High Court. Be that as it may, in this c
r.. case, we have found that reversal of acquittal itself was not
justified.
14. For the foregoing reasons the appeal is allowed. The
judgment and order dated November 23, 2006, rendered by
the learned Single Judge of Punjab and Haryana High Court D
at Chandigarh in Criminal Appeal No. 946 SBA of 2004
convicting the appellant under Section 138 of the Act, is set
aside and judgment dated December 6, 2003, rendered by the
learned Judicial Magistrate I Class, Kamal in Criminal,
Complaint No. 178 of 2001 acquitting the appellant, is restored. E
B.B.B. Appeal allowed.
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