Head
Note:
1.
The
accused in a trial under Section 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 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 consideration and that there was no debt or
liability to be discharged by him.
2.
To disprove the presumptions,
the accused should bring on record such facts and circumstances, upon
consideration of which, the court may either believe that 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 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.
Reportable
IN
THE SUPREME COURT OF INDIA
CRIMINAL
APPELLATE JURISDICTION
Criminal
Appeal No. 2045 OF 2008
(Arising
out Special Leave Petition (Criminal) No. 955 of 2007)
M/s.
Kumar Exports … Appellant
Versus
M/s.
Sharma Carpets … Respondent
J U D G M E N T : J.M. Panchal,
J.
1.
Leave granted.
2.
The
instant appeal is directed against judgment dated 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,
passed by the learned Judicial Magistrate I Class, Karnal, in Criminal
Complaint No. 178 of 2001, acquitting the appellant under Section 138 of the Negotiable
Instruments Act, 1881 (‘the Act’ for short), is set aside and after convicting
the appellant 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 M/s. Kumar
Exports, the appellant herein, 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 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 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 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 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, Karnal and prayed to convict the appellant under Section
138 of the Act.
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 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 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 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 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 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 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 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 no 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 appellant. The learned Magistrate referred to the testimony of 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 abovementioned
conclusions, the learned Magistrate acquitted the 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
Chandigarh. The learned Single Judge, who heard the appeal, was of the opinion
that in terms of Section 139 of 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 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 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 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 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 pleading that it was made for 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
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. 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
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 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 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 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 established by legal evidence
to the satisfaction of the tribunal. Presumption literally means “taking as
true without examination or proof”. Section 4 of the Evidence Act inter-alia
defines the words ‘may presume’ and ‘shall presume as follows: -
“(a) ‘may presume’ – Whenever it is provided by this Act that the
Court may presume a fact, it may either regard such fact as proved, unless and
until it is 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.”
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 ceases and the fact is presumed, unless and until it is 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 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 Section 3 of the Evidence
Act to the provisions of Sections 118 and 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 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 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 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 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 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 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 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 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 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 consideration and that
there was no debt or liability to be discharged by him. However, the court need
not insist in every 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.
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 such facts and circumstances, upon
consideration of which, the court may either believe that 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 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 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 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 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.
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 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 correctness of the contents
of the bill. The bill is neither signed 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 Year and, 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 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
1994-95. Once the testimony of the official of the Sales Tax Department is accepted,
it becomes evident that no transaction 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 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 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 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 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 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 imposing appropriate sentence can
be performed only by the Appellate Court when it reverses the order of
acquittal and not 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 guilty under Section 138 of the Act, the judicial discretion of
imposing appropriate sentence could not 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 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 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, Karnal
in Criminal Complaint No. 178 of 2001 acquitting the appellant, is restored.
……………………….J.
[R.V. Raveendran]
……………………….J.
[J.M. Panchal]
New Delhi;
December 16, 2008.
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