Mere Denial Can't Rebut Cheque Bounce Presumption, Accused Must Produce Probable Evidence: Supreme Court

The Supreme Court on Tuesday ruled that simply denying liability is not enough to rebut the statutory presumptions available to a complainant in a cheque bounce case.

Once the execution of a cheque or the signature on it is admitted, the burden shifts to the accused, who must place probable material on record to show that no legally enforceable debt or liability existed.

A Division Bench of Justice B.V. Nagarathna and Justice Ujjal Bhuyan observed,

"A bare denial of the passing of any consideration or existence of any debt does not support the defence of the accused and therefore to disprove the presumptions, something which is probable has to be brought on record for getting the burden of proof shifted back to the complainant."

The bench also reiterated that a High Court exercising revisional jurisdiction cannot reappreciate evidence or overturn concurrent findings of conviction merely because another view is possible. Such interference is justified only where the findings are perverse or otherwise suffer from serious legal infirmity.

The judgment came in an appeal against a Karnataka High Court decision that had acquitted a man in a cheque bounce case after setting aside the concurrent findings of conviction recorded by the trial court and the sessions court.

The complainant alleged that he had advanced a hand loan of ₹4.50 lakh to the accused in December 2010 to purchase a house site. The amount was to be repaid within a year. The accused later issued a cheque towards repayment of the loan.

However, when the cheque was presented, it was returned unpaid with the endorsement "funds insufficient." The complainant then issued a statutory demand notice as required. As the amount remained unpaid, criminal proceedings were initiated under the Negotiable Instruments Act.

The trial court initially convicted the accused. The sessions court upheld the conviction but reduced the fine. In revision, however, the Karnataka High Court acquitted the accused after primarily holding that the complainant had failed to establish his financial capacity to advance the loan, along with other findings relating to the transaction, and concluded that the statutory presumptions stood rebutted.

Allowing the appeal, the supreme court observed that once the execution of the cheque is admitted, the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act automatically operate in favour of the complainant.

The bench observed, "Since these presumptions are rebuttable presumptions, the accused has the burden of disproving the same by leading evidence, either direct or indirect to the effect that there did not exist any consideration or debt or that the non-existence of the said debt or consideration is so probable that a prudent man ought to suppose that no consideration or debt existed."

The court explained that those presumptions are not displaced by a simple denial. The accused must place facts or circumstances on record that make the non-existence of the debt reasonably probable so that the burden shifts back to the complainant.

The accused claimed that the cheque had not been issued towards repayment of the ₹4.50 lakh loan. Instead, he argued that it had been handed over as security while borrowing ₹40,000 from one of the prosecution witnesses and was later misused.

The apex court found that this defence was unsupported by evidence. There was no receipt or document showing that the alleged ₹40,000 loan had been repaid. Nor had the accused produced any material to show that he had taken steps to recover the allegedly misplaced cheque or initiated any legal proceedings seeking its return.

The bench also noted that the legal notice relied upon by the accused, seeking return of the cheque, was issued only after the cheque bounce complaint had already been filed and the complainant's evidence had been recorded.

Describing the notice as an "afterthought" and an "ex post facto creation of evidence", the court held that it had no evidentiary value in supporting the defence.

The court also disagreed with the High Court's finding that the complainant lacked the financial capacity to advance ₹4.50 lakh. It noted that the complainant had consistently stated that he arranged part of the funds through financial assistance from relatives and acquaintances. Two witnesses supported that version, and nothing emerged during cross-examination to discredit their testimony.

The bench further observed that the accused had not replied to the statutory demand notice. If the defence was that the complainant lacked the financial capacity to advance the loan, that plea ought to have been raised at the earliest opportunity. The accused also failed to produce any independent material to support that contention.

On the scope of revisional jurisdiction, the Supreme Court held that the Karnataka High Court had exceeded its limited powers by reassessing the evidence and substituting its own conclusions for the concurrent findings recorded by the trial court and the sessions court.

The court observed, "The court, in revision, considers the material only to satisfy itself about the correctness, legality and propriety of the findings, sentence and order recorded by the lower court, and should refrain from substituting its conclusion on an elaborate consideration of evidence and the findings of the lower courts should not be reversed merely on the ground that an alternative view is possible on the facts of the case."

The bench reiterated that a revisional court does not sit as a second appellate court. Unless the findings suffer from perversity or another serious legal defect resulting in a miscarriage of justice, it cannot undertake a fresh appreciation of evidence simply because another view is possible.

Holding that the Karnataka High Court had not identified any perversity or other ground justifying interference with the concurrent findings, the top court set aside its judgment and restored the trial court's conviction as affirmed by the sessions court. 

For Petitioner: Advocate Rajkumari Banju

For Respondent: Nuli & Nuli