Supreme Court Reverses Conviction in Cheque Bounce Case: Anss Rajashekar vs. Augustus Jeba Ananth (2019)

Date of the Judgment: 18 January 2019

Citation: 2019 INSC 29

Judges: Dr. Dhananjaya Y. Chandrachud, J., M.R. Shah, J.

Can a conviction under Section 138 of the Negotiable Instruments Act, 1881 be sustained if the accused successfully raises a probable defense that the cheque was not issued for a legally enforceable debt? The Supreme Court of India recently addressed this question in a case where the High Court had reversed the acquittal of the accused. The Supreme Court held that the accused had successfully rebutted the presumption under Section 139 of the Negotiable Instruments Act, 1881. The judgment was delivered by a two-judge bench comprising Justice Dr. Dhananjaya Y. Chandrachud and Justice M.R. Shah, with the opinion authored by Justice Dr. Dhananjaya Y. Chandrachud.

Case Background

The case revolves around a cheque for Rs. 5 lakhs issued by the appellant, Anss Rajashekar, to the respondent, Augustus Jeba Ananth. The respondent claimed that this cheque was issued to repay a portion of a Rs. 15 lakh loan given in February 2004, repayable within six months. The cheque, dated 9 March 2005, was presented twice but was returned due to insufficient funds. The respondent then issued a notice of demand on 10 August 2005. The appellant, in his reply, denied any legally enforceable debt, stating that the cheque was misused. The appellant claimed that he had given blank cheques to the respondent for a housing loan application which was never processed.

The appellant and his wife, and the respondent and his wife, had purchased adjacent house sites on 31 January 2001. The respondent allegedly persuaded the appellant to give him a power of attorney to pursue a housing loan. The appellant claimed that the respondent also obtained original documents and blank cheques, including the one in question. The appellant stated that the power of attorney was later cancelled, and he requested the return of the cheques and documents. The respondent, however, allegedly tried to grab the house sites. The respondent’s father also sent a notice to the appellant to execute the sale deed of the house site.

Timeline

Course of Proceedings

The Trial Court initially acquitted the appellant on 31 January 2009. The respondent appealed to the High Court, which, on 29 October 2010, remanded the case back to the Trial Court, citing the Supreme Court’s judgment in Rangappa v. Sri Mohan [(2010) 11 SCC 441]. On remand, the Trial Court convicted the appellant on 5 March 2011. The appellant then appealed to the Additional Sessions Judge, who reversed the conviction on 5 March 2012. The respondent further appealed to the High Court, which reversed the acquittal and convicted the appellant on 14 November 2014. The Supreme Court granted leave to appeal, condoning a delay of 410 days in filing the special leave petition.

Legal Framework

The case primarily concerns Section 138 and Section 139 of the Negotiable Instruments Act, 1881. Section 138 of the Negotiable Instruments Act, 1881 deals with the dishonour of a cheque for insufficiency of funds. It states that if a cheque is dishonoured due to insufficient funds in the account, the drawer of the cheque is deemed to have committed an offence.

Section 139 of the Negotiable Instruments Act, 1881 states:

“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.”

This section establishes a presumption that if a cheque is issued, it is for the discharge of a debt or liability. However, this presumption is rebuttable, meaning the accused can present evidence to prove otherwise. The Supreme Court has clarified that the standard of proof for rebutting this presumption is that of “preponderance of probabilities.”

Arguments

Appellant’s Arguments:

• The appellant argued that there was no legally enforceable debt. The cheque was not issued to repay any loan but was given as a blank cheque for a loan application that never materialized.
• The appellant contended that he had discharged the burden under Section 139 of the Negotiable Instruments Act, 1881 by raising a probable defense.
• The appellant highlighted the inconsistencies in the complainant’s statements regarding the loan amount. The complainant stated different amounts at different times.
• The appellant pointed out that the complainant failed to provide evidence of the source of funds for the alleged loan.
• The appellant relied on the first appellate court’s judgment, which had acquitted him based on the evidence presented.

Respondent’s Arguments:

• The respondent argued that the presumption under Section 139 of the Negotiable Instruments Act, 1881 applies, as the cheque was signed by the appellant.
• The respondent contended that the appellant failed to discharge the burden of proof to rebut the presumption.
• The respondent asserted that the High Court correctly restored the conviction by the Trial Court.

The innovativeness of the appellant’s argument lies in highlighting the inconsistencies in the complainant’s statements and the lack of evidence for the alleged loan, thereby creating a doubt about the existence of a legally enforceable debt.

Issues Framed by the Supreme Court

The main issue before the Supreme Court was:

1. Whether the appellant had successfully rebutted the presumption under Section 139 of the Negotiable Instruments Act, 1881, that the cheque was issued for a legally enforceable debt or liability.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court relied on Rangappa v. Sri Mohan [(2010) 11 SCC 441]*, explaining that the presumption under Section 139 of the Negotiable Instruments Act, 1881 is rebuttable, and the standard of proof for rebuttal is that of “preponderance of probabilities.”

What weighed in the mind of the Court?

The Supreme Court’s decision was influenced by several factors, primarily focusing on the inconsistencies in the complainant’s evidence and the appellant’s probable defense. The Court emphasized that the presumption under Section 139 of the Negotiable Instruments Act, 1881 is rebuttable and that the accused can raise a probable defense to counter it. The Court noted the following:

• The complainant’s varying statements regarding the loan amount (Rs. 15 lakhs in the complaint, Rs. 20,000 in the notice, and Rs. 5 lakhs during cross-examination).
• The lack of evidence regarding the source of funds for the alleged Rs. 15 lakh loan.
• The complainant’s admission that he received Rs. 10 lakhs from the appellant under a loan transaction, which he claimed to have repaid.
• The appellant’s defense that the cheque was given as a blank cheque for a loan application and not towards a debt.

The court gave more weightage to the factual aspects of the case, such as the inconsistencies in the complainant’s statements and the lack of evidence for the loan, indicating that the factual matrix played a significant role in the decision-making process.

The Supreme Court’s reasoning was based on a step-by-step analysis of the evidence and the legal principles involved. The Court emphasized that the High Court had failed to appreciate the evidence properly and had not given due weight to the findings of the first appellate court. The Court also highlighted the importance of the “preponderance of probabilities” standard in rebutting the presumption under Section 139 of the Negotiable Instruments Act, 1881.

The court considered alternative interpretations but rejected them because the complainant’s evidence was unreliable and the appellant’s defense was more probable. The court concluded that the appellant had successfully rebutted the presumption under Section 139 of the Negotiable Instruments Act, 1881.

The reasons for the decision are:

• The complainant’s inconsistent statements about the loan amount.
• The lack of evidence regarding the source of funds for the alleged loan.
• The appellant’s probable defense that the cheque was not issued for a legally enforceable debt.
• The High Court’s failure to properly appreciate the evidence and the findings of the first appellate court.

The Supreme Court quoted from the judgment:

“28 In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of `preponderance of probabilities’. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail . As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.”

“On a totality of the facts and circumstances and based on the evidence on the record, the first appellate court held that the presumption under Section 139 of the Act stood rebutted and that the defence stood probabalised.”

“For the reasons indicated above, we are of the view that having regard to the law laid down by the three Judge Bench in Rangappa (supra) the appellant duly rebutted the presumption under Section 139 of the Act. His defence that there was an absence of a legally enforceable debt was rendered probable on the basis of the material on record.”

There were no minority opinions in this case.

Key Takeaways

• The presumption under Section 139 of the Negotiable Instruments Act, 1881, that a cheque was issued for a legally enforceable debt, is rebuttable.
• The standard of proof for rebutting this presumption is that of “preponderance of probabilities.”
• Inconsistencies in the complainant’s statements and lack of evidence can create doubt about the existence of a legally enforceable debt.
• The accused can rely on the complainant’s evidence to raise a probable defense.
• Appellate courts should be circumspect in overturning acquittals by lower courts.

This judgment clarifies that the presumption in cheque bounce cases is not absolute and can be rebutted if the accused presents a probable defense. It also emphasizes the need for a thorough examination of evidence by appellate courts before reversing acquittals.

Directions

The Supreme Court set aside the High Court’s judgment convicting the appellant and restored the order of acquittal passed by the first appellate court.

Development of Law

The ratio decidendi of this case is that the presumption under Section 139 of the Negotiable Instruments Act, 1881 is rebuttable, and the standard of proof for rebuttal is that of “preponderance of probabilities.” This reaffirms the position of law established in Rangappa v. Sri Mohan [(2010) 11 SCC 441]. The judgment emphasizes the need for a thorough examination of evidence and proper appreciation by appellate courts before reversing acquittals.

Conclusion

The Supreme Court’s decision in Anss Rajashekar vs. Augustus Jeba Ananth reinforces the principle that the presumption of a legally enforceable debt in cheque bounce cases is not absolute. The court held that the accused had successfully rebutted the presumption by raising a probable defense, highlighting inconsistencies in the complainant’s evidence and the lack of evidence for the alleged loan. The Supreme Court set aside the High Court’s judgment and restored the acquittal by the first appellate court.