Introduction
The Hon’ble Supreme Court of India in Ashok Singh vs State of Uttar Pradesh and anr. Bearing Criminal Appeal No. 4171 of 2024 has armoured the well-settled position in law that the Complainant does not bear the initial burden of proving their financial capacity when filing cases under Section 138 of the Negotiable Instruments Act, 1881. This judgment marks an important development in Negotiable Instruments jurisprudence by establishing clear guidelines on the presumptions that operate in favour of the Complainant and the shifting burden of proof in such cases. This Judgment particularly addresses the common defence strategy where the Accused persons questions the financial capacity of the Complainant to have extended the loan for which the dishonoured cheque was allegedly issued.
Facts
The Appellant herein had filed a Complaint alleging that he advanced a loan of Rs. 22,00,000 (Rupees Twenty-Two Lakhs only) to the Respondent. When the Appellant demanded the repayment of the afore-said loan, the Respondent issued a cheque bearing no. 726716 dated 17.03.2010 for the full amount drawn on the Bank of Baroda. Upon presentation of the cheque, the same was dishonoured with the endorsement “payment stopped by drawer.” Following this, the Appellant sent a legal notice dated 18.05.2010, however the said Legal Notice was not replied by the Accused, therefore, a complaint case was filed by the Appellant.
The Trial Court found the Accused guilty and sentenced him to one-year simple imprisonment along with a fine of Rs. 35,00,000 (Rupees Thirty-Five Lakhs only). The Appellate Court upheld this decision. However, the Hon’ble High Court allowed the criminal revision petition and acquitted the Accused, noting that the Complainant has failed to prove his case that the cheque was issued towards discharge of a lawful debt specially when the Complainant has failed to disclose details of his Bank Account and date when he withdrew the amount in question.
Issue Involved
The issue before the Hon’ble Supreme Court was whether, in cases under Section 138 of the Negotiable Instruments Act, 1881, the Complainant has an initial burden to prove their financial capacity to advance the loan amount for which the cheque was allegedly issued.
Analysis
The Hon’ble Supreme Court, established an important legal principle that the complainant has no onus to prove financial capacity at the threshold in cases under Section 138 of the Negotiable Instruments Act, 1881.
The Court clarified that once the drawer admits to signing the cheque, the statutory presumption under Sections 118 and 139 of the Negotiable Instruments Act, 1881 comes into operation. This presumption establishes that the cheque was issued for the discharge of a legally enforceable debt or liability.
The Court emphasized that the onus is not on the Complainant at the threshold to prove his capacity/financial wherewithal to make the payment in discharge of which the cheque is alleged to have been issued in his favour. Only if an objection is raised that the Complainant was not in a financial position to pay the amount so claimed by him to have been given as a loan to the Accused, only then the Complainant would have to bring before the Court cogent material to indicate that he had the financial capacity.
The Supreme Court relied on its previous decisions, particularly Rohitbhai Jivanlal Patel v. State of Gujarat (2019) 18 SCC 106 and Tedhi Singh v. Narayan Dass Mahant (2022) 6 SCC 735, to reinforce this principle. In Tedhi Singh, the Court had held in the case under Section 138 of the Negotiable Instruments Act, 1881 the Complainant need not show in the first instance that he had the capacity. The proceedings under Section 138 of the Negotiable Instruments Act, 1881 is not a civil suit. At the time, when the Complainant gives his evidence, unless a case is set up in the reply notice to the statutory notice sent, that the complainant did not have the wherewithal, it cannot be expected of the Complainant to initially lead evidence to show that he had the financial capacity.
The Court further observed that the burden shifts to the Accused to rebut this presumption by bringing on record facts and circumstances that shows a preponderance of probabilities tilting in their favour. A mere oral statement denying the existence of debt is insufficient to rebut the presumption, especially when the signature on the cheque has been admitted.
The Court found it significant that the Accused admitted to signing the cheque but claimed that the cheque was lost. However, the timeline of events undermined this defence, as the intimation about the lost cheque reached the police only in 2011, despite being dated March 12, 2010, while the cheque was presented on March 17, 2010.
The Supreme Court allowed the appeal, set aside the High Court’s order, and restored the conviction, though with a modified sentence of only fine payment without imprisonment, considering the age of the Accused and other factors.
This judgment reinforces the principle that in cases under Section 138 of the Negotiable Instruments Act 1881, the initial burden is not on the Complainant to prove his financial capacity to advance the loan amount. The Complainant only needs to establish the basic elements: genuineness of the cheque, timely presentation, dishonour, and proper notice. Once these are established, the statutory presumption operates in favour of the Complainant, and the burden shifts to the accused to rebut it with credible evidence.