Mr. Ajit Nair, Advocate v. TRILOK SINGH

Judgment

1. For the grounds and reasons stated in the application, the same is allowed. Delay of 65 days in filing the appeal is condoned.

2. Disposed of. CRL.M.A. 9249/2025(seeking exemption)

4. Exemption is granted, subject to all just exceptions. The Petitioner shall file legible and clearer copies of exempted documents, compliant with practice rules, before the next date of hearing.

5. Accordingly, the application stands disposed of. CRL.L.P. 203/2025

6. The present application under Section 419(4) of the Bharatiya Signature Not Verified Digitally Signed By:AKANSHA SINGH Signing Date:01.04.2025 20:40:26 CRL.L.P. 203/2025 Page 1 of 15 Nagarik Suraksha Sanhita, 20231 seeks leave to appeal against the judgment dated 19th November, 2024 passed by the JMFC (NI Act-03), Patiala House Court, New Delhi, in CC No. 13496/2019, titled as “Sanjeev Singh Chauhan v. Trilok Singh”, whereby the Trial Court has acquitted the Respondent for the offence under Section 138 of the Negotiable Instruments Act, 1881.2

Factual Background

7. The relevant facts of the case, as set out in the complaint are summarised as follows:

7.1 In May 2017, the Petitioner advanced a friendly loan of ₹10,00,000/- to the Respondent, who is stated to be a personal acquaintance. The loan was disbursed partly by way of cheque for ₹2,00,000/-, and the remaining amount was paid in cash.

7.2 At the time of receiving the loan, the Respondent executed a mortgage deed in favour of the Petitioner and undertook to repay the amount in 32 monthly instalments of ₹21,000/- each. However, the Respondent defaulted and failed to pay any of the agreed instalments.

7.3 Subsequently, the Respondent issued a cheque bearing No. 024562 towards discharge of his liability. The said cheque, when presented for encashment on 16th August, 2019, was returned unpaid due to insufficient funds in the Respondent’s account.

7.4 Following this, the Petitioner issued the statutory legal notice dated 20th August, 2019 under Section 138(b) NI Act, calling upon the Respondent to make the payment for the amount of dishonoured cheque. However, the 1 “BNSS” 2 “NI Act” Signature Not Verified Digitally Signed By:AKANSHA SINGH Signing Date:01.04.2025 20:40:26 CRL.L.P. 203/2025 Page 2 of 15 Respondent failed to make the outstanding payments, leading to the filing of the complaint for the offence under Sections 138 NI Act. Proceedings before the Trial Court

7.5 On the basis of the complaint, the Trial Court took cognizance and summoned the Respondent. Upon appearance, notice under Section 251 of the Code of Criminal Procedure, 19733 was served, to which the Respondent pleaded not guilty and claimed trial.

7.6 In support of his case, the Petitioner examined himself as well as CW- 1 and one Sh. Sanjay Kumar, CW-2. The Petitioner adduced evidence to prove the following documents:

4. Original cheque in question Original bank return memo Legal demand notice Ex-CW1/1 Ex-CW1/2 Ex-CW1/3 Postal receipt of speed post and delivering Ex-CW1/4 detail

5. Bank account statement from 01.04.2017 Ex-CW1/X1 to 30.08.2017

6. ITR of Sh. Sanjay for the period 2017- Ex-CW1/X2 2018

7. ITR of Ms. Kiran for the period 2018-2019 Ex-CW1/X3

7.7 At the same time, Sh. Sanjay Kumar, CW-2, relied upon following documents:

1. Statement of bank account for the period 01.04.2021 to 31.03.2022 Ex-CW-2/XX1 3 “CrPC” Signature Not Verified Digitally Signed By:AKANSHA SINGH Signing Date:01.04.2025 20:40:26 CRL.L.P. 203/2025 Page 3 of 15

2. Salary slips for the month July, 2019 till November, 2019 Ex-CW-2/XX2

7.8 Subsequently, in the statement recorded under Section 313 CrPC, the Respondent denied liability and alleged misuse of the cheque by the Petitioner. However, the Respondent did not lead any defence evidence. The statement of the Respondent under Section 313 CrPC reads as follows: “Q1. All the incriminating evidence has been put to the accused and the accused has been asked as to what he has to say? Ans. I have signed the cheque in question. I have not filled the particulars on the same. I have received the legal notice. L have taken an amount of Rs. 1,65,000/- from the complainant in two installments of Rs. 1,25,000/- and Rs. 40,000/- respectively by way of cheque. The cheque in question was given to the complainant only far security purposes and the same has been misused by the complainant. I am ready & willing to pay Rs. 1,65,000/- to the complainant. I have no liability equivalent to the amount of cheque in question. This is a false case against me. Q2. Do you wish to lead DE. Ans. No.”

7.9 Based on the material on record and the evidence led by the parties, the Trial Court proceeded to deliver the impugned judgment, whereby the Respondent was acquitted of the offence under Section 138 of the NI Act. Petitioner’s grounds of challenge

8. Aggrieved by the impugned judgment of acquittal, the Petitioner has preferred the present application seeking leave to appeal, raising the following grounds:

8.1 The Trial Court failed to properly apply the statutory presumptions under Sections 118(a) and 139 of NI Act. Once the execution of the cheque is admitted, as in the present case, there arises a presumption in favour of the holder that the cheque was issued for the discharge, in whole or in part, of a legally enforceable debt or liability. This presumption is rebuttable in nature, Signature Not Verified Digitally Signed By:AKANSHA SINGH Signing Date:01.04.2025 20:40:26 CRL.L.P. 203/2025 Page 4 of 15 but the burden lies squarely on the drawer of the cheque to disprove the existence of such liability by leading cogent and credible evidence. In the present case, the Respondent unequivocally admitted to having signed and issued the cheque in question. However, beyond a bare assertion that the cheque was given as “security,” no substantive defence was raised, nor was any evidence adduced to rebut the presumption. It is well-settled that a mere plea that the cheque was issued as security, without anything more, cannot discharge the burden imposed under Sections 118 and 139 of the Act. In the absence of any supporting material or circumstances demonstrating that no debt or liability existed, the statutory presumption must stand.

8.2 The Trial Court erroneously reversed the burden of proof and rejected the complaint on the ground that the Petitioner failed to establish the underlying loan transaction. This approach is legally untenable, as it runs contrary to the settled legal position that the initial burden on the complainant shifted to the Respondent upon proof of execution of the cheque, which in this case stands admitted.

8.3 The finding that there was insufficient evidence to establish the loan overlooks the express provision under Section 139, which presumes that the cheque was issued in discharge of a legally enforceable liability. The Trial Court, instead of evaluating whether the Respondent had discharged the onus to rebut the presumption, wrongly insisted on documentary proof from the Petitioner, despite the statutory presumption operating in his favour.

8.4 The Respondent, in his statement under Section 313 CrPC, did not deny the signature on the cheque, nor did he lead any evidence to rebut the presumption. His sole defence that the cheque was given as ‘security’ remained uncorroborated by any material evidence. In this context, the Signature Not Verified Digitally Signed By:AKANSHA SINGH Signing Date:01.04.2025 20:40:26 CRL.L.P. 203/2025 Page 5 of 15 judgments in V.S. Yadav v. Reena,4 and Hiten P. Dalal v. Bratindranath Banerjee5 are squarely applicable, wherein it was held that the presumption under Section 139 can be rebutted only by cogent evidence, and not by a mere plausible explanation.

8.5 While certain discrepancies were observed in the narration of events regarding the disbursal of the loan, these were adequately clarified. The Petitioner and Respondent were friends, and the Respondent is stated to have borrowed a sum of ₹10 lakhs from the Petitioner on 10th May, 2017. Out of this amount, ₹8 lakhs was paid in cash and ₹2 lakhs by cheque. It is the Petitioner’s case that the Respondent later returned the cheque and requested that the balance be paid in cash. The Petitioner managed to arrange ₹75,000/- in cash and issued another cheque for ₹1,25,000/- to make up the remaining amount. Although this factual sequence was not specifically mentioned in the initial complaint or supporting affidavit, it was clearly brought on record during the Petitioner’s cross-examination and remains uncontroverted. The Trial Court, however, failed to take this explanation into account when evaluating the Petitioner’s claim. This omission has resulted in a misreading of the evidentiary record and has materially affected the outcome of the case. Analysis

9. In proceedings under Section 138 of the NI Act, the law creates a presumption in favour of the holder of the cheque that it was issued in discharge of a legally enforceable debt or liability. Section 118(a) of the Act presumes that the cheque was made or drawn for consideration, while 4 2010 SCC OnLine Del 3294. 5 (2001) 6 SCC 16. Signature Not Verified Digitally Signed By:AKANSHA SINGH Signing Date:01.04.2025 20:40:26 CRL.L.P. 203/2025 Page 6 of 15 Section 139 mandates that the Court shall presume that the cheque was issued for the discharge of such liability. Once execution of the cheque is admitted or established, these statutory presumptions operate automatically in favour of the complainant. However, it is equally well-settled that these presumptions are rebuttable. The accused is entitled to demonstrate, by cogent material or circumstances, that the debt or liability did not exist at the time of issuance of the cheque. The presumption does not render the complainant’s case infallible, it only shifts the initial burden, which can be discharged by the accused on a balance of probabilities.

10. However, the presumption under Section 139 is rebuttable. The accused is not required to conclusively prove a negative fact. Rather, the burden is to raise a probable defence sufficient to create reasonable doubt regarding the existence of a legally enforceable debt or liability. The Supreme Court, in Rajesh Jain v. Ajay Singh,6 held that the phrase “unless the contrary is proved” in Section 139 does not imply that the accused must necessarily prove the negative, i.e., that the instrument was not issued in discharge of any debt or liability. Instead, it suffices if the accused can demonstrate that the existence of such liability is improbable, so as to persuade a prudent person, under the given circumstances, that no such debt existed.

11. The law permits the accused to rebut the statutory presumption in two distinct ways: first, by leading evidence to directly prove that no debt or liability existed; or second, by relying on circumstantial or inherent inconsistencies in the complainant’s case to show, on a preponderance of probabilities, that the debt was not legally enforceable. The Supreme Court, Signature Not Verified Digitally Signed By:AKANSHA SINGH Signing Date:01.04.2025 20:40:26 CRL.L.P. 203/2025 Page 7 of 15 in Rohitbhai Jivanlal Patel v. State of Gujarat,7 observed that if the accused raises a plausible defence that creates doubts about the existence of a legally enforceable debt or liability, the burden shifts back to the complainant, and the presumptions under Sections 118 and 139 of the Act no longer benefit him. Thus, the law does not compel the accused to prove a negative. It merely requires the accused to place before the Court a defence that is credible and probable in the facts of the case.

12. In the present case, the issuance of the cheque and the signature thereon are admitted by the Respondent. However, a closer examination of the record shows that the Trial Court rightly found the statutory presumptions under Sections 118 and 139 to have been rebutted on a preponderance of probabilities. The Respondent, in his statement under Section 313 CrPC, clearly stated that the cheque was given only as security in respect of a smaller sum of ₹1,65,000/-, and not towards any legally enforceable liability equivalent to the cheque amount. Notably, the Respondent categorically denied having taken a loan of ₹10 lakhs, and asserted that the cheque was misused. The Respondent acknowledged his liability to the extent of ₹1,65,000/- and expressed his willingness to repay the same, however, he denied any liability for the amount mentioned in the cheque. Though he did not lead any defence evidence, his admissions and explanations were relevant for assessing whether the statutory presumption stood rebutted.

13. The central issue, therefore, is whether the defence so raised by the Respondent was sufficient to rebut the presumptions under Sections 118 and