Rajesh Jain v. Ajay Singh, 2021 SCC OnLine SC 1275 – Decided on 09.10.2023

Once the presumption under Section 139 of the NI Act was given effect to, the Courts ought to have proceeded on the premise that the cheque was issued in discharge of a debt/ liability.

Summary:

The Supreme Court vide this judgment, applied the legal principles governing the presumption under Section 139 of the NI Act and shifting the burden of proof on the complainant instead of the accused. The Supreme Court has clarified that once the signature on the cheque is admitted by the accused, it is obligatory for the Court to raise the presumption under Section 139 that the cheque was issued in discharge of a debt or liability. The burden then shifts to the accused to prove by preponderance of probabilities that there was no debt or liability.

The Supreme Court has found that the accused had failed to discharge his evidential burden and his defence was full of contradictions and inconsistencies. The Court also noted that the courts below had wrongly fixed the burden on the complainant to prove his case beyond reasonable doubt, without considering the effect of the presumption.

Facts:

The complainant had alleged that he had lent money to the accused on various occasions and the accused had issued a cheque for INR 6,95,204/- towards part repayment of the outstanding dues. The cheque was dishonoured by the bank due to insufficient funds and the accused failed to pay the amount despite a legal notice. The Trial Court and the High Court had acquitted the accused on the grounds that he had rebutted the presumption under Section 139 of the NI Act by raising doubts about the existence of a legally enforceable debt or liability. They also found faults with the complainant’s case on various aspects such as the validity of the legal notice, the details of the loan transactions, and the registration under the Money Lenders Act.

Issues:

Whether the accused can be said to have discharged his ‘Evidential Burden’, leading the lower courts to determine that the legal presumption established under Section 139 of NI Act, has been effectively challenged?

Judgement:

The Supreme Court held that both the courts below had erred in their approach and appreciation of evidence. It observed that once the signature on the cheque was admitted by the accused, it was obligatory for the courts to raise the presumption under Section 139 that the cheque was issued in discharge of a debt or liability. The burden then shifted to the accused to prove by preponderance of probabilities that there was no debt or liability. The Court found that the accused had failed to discharge his evidential burden and his defence was full of contradictions and inconsistencies. The Court also noted that the courts below had wrongly fixed the burden on the complainant to prove his case beyond reasonable doubt, without considering the effect of the presumption.

The Supreme Court, therefore, set aside the judgments of the courts below and convicted the accused with a fine of twice the amount of the cheque, failing which he would undergo simple imprisonment for one year.

Analysis:

The Supreme Court clarified the distinction between legal and evidential burdens in cases. The legal burden remains constant and involves proving a party’s case, while the evidential burden may shift depending on the evidence presented. The Court explained the types of presumptions, categorizing them as factual (inferences based on logic) and legal (either unchallengeable or open to challenge). This distinction helps in understanding how burdens and presumptions work in legal cases.

The initial framing of the issue by the Trial Court was marred by a fundamental flaw, wherein it erroneously mandated the complainant to establish the existence of a legally valid and enforceable debt. This misconception engendered ambiguity regarding the appropriate allocation of the burden of proof within the case. The Supreme Court has since rectified this matter by providing lucid guidance. It expounded upon the operation of these legal principles, delineated the requisite evidentiary criteria for their establishment or refutation, and elucidated the circumstances under which the burden of proof transitions from the complainant to the accused. This landmark decision serves as a significant precedent that furnishes lower courts with a comprehensive understanding of these principles and their judicious application in cases pertaining to dishonoured cheques in the Indian legal context.