Supreme Court Upholds Conviction Under Section 138 of NI Act: Kishan Rao vs. Shankargouda (2 July 2018)

Date of the Judgment: 2 July 2018
Citation: 2018 INSC 603
Judges: A.K. Sikri, J., Ashok Bhushan, J.
Can a High Court overturn a conviction under Section 138 of the Negotiable Instruments Act, 1881, simply by re-evaluating the evidence? The Supreme Court addressed this question in a case where a High Court had acquitted an accused, reversing the decisions of the trial and appellate courts. The Supreme Court held that the High Court exceeded its revisional jurisdiction by re-appreciating evidence and substituting its own view. This judgment, authored by Justice Ashok Bhushan, clarifies the limits of revisional jurisdiction under the Code of Criminal Procedure, 1973.

Case Background

The appellant (complainant) and the respondent (accused) had a friendly relationship. The accused borrowed Rs. 2,00,000 from the complainant on 25 December 2005, promising to repay it within a month. The accused issued a post-dated cheque for Rs. 2,00,000, dated 25 January 2006. When the complainant presented the cheque, it was dishonored due to insufficient funds. The cheque was presented again on 1 March 2006, and it was again returned on 2 March 2006, with the same reason.

The complainant sent a notice demanding payment, which the accused received on 14 March 2006. The accused replied on 31 March 2006, alleging that the cheque was stolen by the complainant. The complainant filed a case under Section 138 of the Negotiable Instruments Act, 1881.

Timeline

Course of Proceedings

The trial court convicted the accused under Section 138 of the Negotiable Instruments Act, 1881, sentencing him to a fine of Rs. 2,50,000 and six months of simple imprisonment. The appellate court upheld the conviction. However, the High Court, in its revisional jurisdiction, overturned the conviction, stating that the accused had created doubt regarding the existence of the debt. The complainant then appealed to the Supreme Court.

Legal Framework

The case primarily revolves around Section 138 and Section 139 of the Negotiable Instruments Act, 1881, and the scope of revisional jurisdiction under Section 397 and Section 401 of the Code of Criminal Procedure, 1973.

• Section 138 of the Negotiable Instruments Act, 1881: This section deals with the dishonor of cheques for insufficiency of funds. It states that if a cheque is dishonored for insufficient funds, the drawer of the cheque is deemed to have committed an offense and is liable for punishment.
• Section 139 of the Negotiable Instruments Act, 1881: This section establishes a presumption in favor of the holder of a cheque. It 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.”
• Section 397 of the Code of Criminal Procedure, 1973: This section grants the High Court the power to call for and examine the record of any proceedings before any subordinate court to satisfy itself as to the correctness, legality, or propriety of any finding, sentence, or order.
• Section 401 of the Code of Criminal Procedure, 1973: This section outlines the High Court’s powers of revision. It states that the High Court may exercise all the powers of an appellate court in a revision.

Arguments

Appellant’s Arguments:

• The trial court, after evaluating the evidence, correctly convicted the accused. The appellate court affirmed this conviction.
• The High Court overstepped its revisional jurisdiction by re-evaluating the evidence and concluding that the accused had raised a doubt about the debt’s existence.
• The presumption under Section 139 of the Negotiable Instruments Act, 1881, was rightly drawn against the accused, and he failed to rebut it by presenting any evidence.
• The High Court cannot substitute its own opinion after re-appreciating evidence in revisional jurisdiction.

Respondent’s Arguments:

• The respondent was served, but no one appeared on his behalf during the hearing.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue addressed by the Court was:

1. Whether the High Court, in exercising its revisional jurisdiction under Section 397/401 of the Code of Criminal Procedure, 1973, was justified in setting aside the conviction under Section 138 of the Negotiable Instruments Act, 1881, by re-appreciating the evidence and substituting its own view.

Treatment of the Issue by the Court

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

Authorities

The Supreme Court relied on several cases to support its decision:

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 State of Kerala vs. Puttumana Illath Jathavedan Namboodiri [1999 (2) SCC 452]* to emphasize that the High Court’s revisional jurisdiction is supervisory, not appellate, and it should not re-appreciate evidence.
• The Court cited Sanjaysinh Ramrao Chavan vs. Dattatray Gulabrao Phalke and others [2015 (3) SCC 123]* to reinforce that the High Court should not interfere with the Magistrate’s order unless it is perverse or unreasonable.
• The Court referred to Kumar Exports vs. Sharma Carpets [2009 (2) SCC 513]* to explain the presumption under Section 139 of the Negotiable Instruments Act, 1881, and how it shifts the burden of proof to the accused.
• The Court considered Rangappa vs. Sri Mohan [2010 (11) SCC 441]* to clarify that the presumption under Section 139 includes the existence of a legally enforceable debt or liability, which is rebuttable.

What weighed in the mind of the Court?

The Supreme Court emphasized that the High Court had overstepped its revisional jurisdiction by re-evaluating the evidence and substituting its own view. The Court noted that the High Court did not find any perversity in the lower courts’ decisions, nor did it identify any lack of evidence. The Supreme Court reaffirmed the importance of the presumption under Section 139 of the Negotiable Instruments Act, 1881, and the accused’s failure to rebut it.

The Court’s reasoning was based on the following points:

• The High Court’s revisional jurisdiction is limited and does not allow for a re-appreciation of evidence unless there is a clear perversity or error in the lower courts’ findings.
• The presumption under Section 139 of the Negotiable Instruments Act, 1881, is a strong presumption that the cheque was issued for a debt or liability, and it is up to the accused to rebut it.
• The accused did not present any evidence to rebut the presumption, and the High Court’s conclusion that the accused had raised a doubt was not supported by any evidence.

The Court quoted from the judgment:

“In its revisional jurisdiction, the High Court can call for and examine the record of any proceedings for the purpose of satisfying itself as to the correctness, legality or propriety of any finding, sentence or order.”

“Unless the order passed by the Magistrate is perverse or the view taken by the court is wholly unreasonable or there is non-consideration of any relevant material or there is palpable misreading of records, the Revisional Court is not justified in setting aside the order, merely because another view is possible.”

“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.”

Key Takeaways

• The High Court’s revisional jurisdiction is limited and does not allow for a re-appreciation of evidence.
• The presumption under Section 139 of the Negotiable Instruments Act, 1881, is a strong presumption that the cheque was issued for a debt or liability.
• The accused must present evidence to rebut the presumption under Section 139.
• Mere denial of the debt is not sufficient to rebut the presumption.

Directions

The Supreme Court set aside the High Court’s judgment and restored the trial court’s conviction, as affirmed by the appellate court.

Development of Law

The ratio decidendi of this case is that a High Court, in exercise of revisional jurisdiction, cannot re-appreciate evidence and substitute its own view unless the findings of the lower court are perverse or based on no evidence. This judgment reinforces the limits of revisional jurisdiction and the importance of the presumption under Section 139 of the Negotiable Instruments Act, 1881. It also clarifies that the accused must present evidence to rebut the presumption, and mere denial is not sufficient. There is no change in the previous position of law, but the judgment reaffirms the existing legal principles.

Conclusion

The Supreme Court allowed the appeal, setting aside the High Court’s judgment and restoring the conviction by the trial court. The Court held that the High Court had exceeded its revisional jurisdiction by re-evaluating evidence and substituting its own view. The judgment emphasizes the importance of the presumption under Section 139 of the Negotiable Instruments Act, 1881, and the need for the accused to present evidence to rebut it.