Presumption under Section 139 NI Act cannot be rebutted unless cogent evidence is led by accused: Supreme Court

The Supreme Court recently held that unless cogent evidence is led by the accused in defense of his case, the presumption under Section 139 of the Negotiable Instruments Act of 1881 (NI Act) cannot be rebutted [Rajaram s/o Sriramulu Naidu (since deceased) through LRs v. Maruthachalam (since deceased) through LRs]..A division bench of Justices BR Gavai and MM Sundresh was of the view that the standard proof to rebut the presumption under section 139 NI Act is that of preponderance of probabilities.The Court was hearing an appeal challenging a decision of the Madras High Court which reversed the decision of the Trial Court and had convicted the appellant in a cheque bounce case under section 138 of the NI Act. .In the year 1992 and 1995, the appellant's wife subscribed to two 5-year chit funds with the respondent and upon the respondent's persuasion that in order to be a successful bidder, the appellant submitted two blank cheques as security on behalf of his wife. In 1997, the bank account on which the said cheques were drawn was closed due to non-operation.Both the chits got matured in the year 1997 and 1999 respectively, but the appellant was not the successful bidder in either of them. Therefore, repeated requests were made by the appellant to the respondent for releasing the subscription amount to the tune of ₹6 lakhs for both the chits, though to no avail. When the appellant and his wife threatened the respondent with legal action, the respondent immediately presented the cheques for encashment without any information or intimation to the appellant. Both the cheques were returned back to respective respondents with an endorsement stating “account closed”.Thereafter, two complaint cases were initiated by the respective respondents against the appellant under Section 138 of the NI Act. The same came to be dismissed by the trial court. Aggrieved, the respondents moved an appeal before the Madras High Court, which allowed the appeal and the appellant was convicted.However, during the pendency of the appeal and pursuant to the dismissal of the complaint cases, both the respondents instituted civil suits for recovery of money on the basis of promissory notes alleging that the appellant took on October 20, 2008 and October 25, 2008, ₹3 Lakh each from both of them with a promise to return the same to them with 24 per cent interest. It was stated by the respondents that they had given the said amount from their agricultural income.They also stated that the appellant had issued both of them cheques of ₹3.5 lakh each towards the discharge of liability, however both of them got dishonored since appellant had closed the account. Both the civil suits were dismissed by the trial court. Aggrieved, the respondents moved the High Court in appeal, which was decreed in favor of the respondents.The appellants then moved the present appeal before the apex court..The Supreme Court noted that the accused-appellant had examined the income tax officer who had produced certified copies of the income tax returns of the respondents for the relevant financial year.The apex court observed that the trial court while the dismissing the complaints of the respondents had found that the income tax returns of the complainant did not disclose that they had lent ₹3 lakh to the appellant and that the income declared was not sufficient for the respondents to the give the lent amount to the appellant.Therefore, the case of the respondents that they had given a loan to the accused from their agricultural income was found to be unbelievable by the trial court and doubts were raised by the Court if actually the complainant had lent an amount of ₹3 lakh to the accused.In its analysis, the Supreme Court placed reliance on its decision in Basalingappa v. Mudibasappa (2019) to observe that:"This Court has held that once the execution of cheque is admitted, Section 139 of the N.I. Act mandates a presumption that the cheque was for the discharge of any debt or other liability. It has however been held that the presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities."Affirming the findings reached by the trial court, the Supreme Court said that the defense raised by the appellants do not inspire confidence or meet the standard of 'preponderance of probability' and therefore, the appellant has been able to successfully rebut the presumption under section 139 of the NI Act in his favor."The standard of proof for rebutting the presumption is that the preponderance of probabilities. Applying this principle, the learned Trial Court had found that the accused had rebutted the presumption on the basis of the evidence of the defence witnesses and attending circumstances. The scope of interference in an appeal against acquittal is limited. Unless the High Court found that the appreciation of the evidence is perverse, it could not have interfered with the finding of acquittal recorded by the learned Trial Court," the Court said.It, therefore, was of the opinion that the view taken by the High Court was not justified.Accordingly, the Court allowed the appeal and acquitted the appellant. .Advocate Neha Sharma appeared for the appellant and Advocate V Prabhakar appeared for the respondents..[Read Judgment]