Introduction 

• This is a landmark judgment where the Court laid down the law on presumption under Negotiable Instruments Act, 1881. 
• The Judgment was delivered by a 2- judge Bench consisting of Justice BV Nagarathna and Justice Augustine George Masih. 

Facts

• The Appellant (original complainant) claims he lent Rs. 2,00,000 to the Respondent for family necessities. 
• The Respondent allegedly issued cheque drawn on Bank of India as a guarantee for repayment. 
• An agreement was signed between the parties, with the loan to be repaid within six months. 
• When the Appellant presented the cheque for encashment on 22nd October 2013, it was dishonored due to "insufficient funds" (per Bank Memo dated 24th October 2013). 
• The Appellant sent a Demand Notice dated 31st October 2013, alleging intentional cheating. 
• The Respondent replied on 11th November 2013, claiming the accusations were false and lacked details about the alleged loan transaction. 
• The Appellant filed a Private Complaint which was registered.  
• The Respondent claimed the cheque was actually issued to one Mr. Mallikarjun in 2012 for security purposes, who never returned it. 
• During cross-examination, it was revealed that the cheque was not originally given as security but was given after the Respondent failed to repay the loan. 
• The Trial Court found that the agreement lacked the Respondent's signature on the terms (only on the stamp paper) and that the Appellant failed to declare the loan in his Income Tax Returns. 
• The Trial Court dismissed the complaint and acquitted the Respondent. 
• The High Court affirmed the Trial Court's judgment, noting contradictions in the Appellant's statement about when the cheque was issued. 
• The case has now been appealed to the Supreme Court. 

Issues Involved

• Whether the High Court had rightly affirmed the acquittal of the respondent in a complaint case moved for the offence punishable u/s. 138 of the Negotiable Instruments Act, 1881 (NI Act)? 

Observations 

• Section 118 and Section 139 of the Negotiable Instruments Act, 1881 (NI Act), establish a presumption that a cheque issued is towards the discharge of a liability, either wholly or partially. 
• The presumption under these sections is rebuttable, meaning the accused can present evidence to disprove it. The burden of proof shifts to the accused once the complainant establishes a prima facie case. 
• The accused can rebut the presumption by: 
  • Providing conclusive evidence that the cheque was not issued towards a liability. 
  • Using circumstantial evidence based on the standard of preponderance of probabilities. 
• The accused can rely on materials produced by the complainant, such as the complaint, legal notice, trial proceedings, and statements made under Section 313 of the CrPC, without introducing new evidence. 
• The case involves a challenge against concurrent findings of acquittal. Courts must be cautious in such cases as the presumption of innocence is strengthened by these findings. 
• The presumption of innocence is reinforced in acquittal cases, making the prosecution’s burden heavier. 
• Courts generally do not interfere unless there is clear perversity or compelling reasons. 
• If two views are possible, the court should not reverse the acquittal unless there is a miscarriage of justice. 
• Perversity is identified when findings ignore relevant material, consider irrelevant material, or defy logic. 
• The court may interfere with an acquittal if: 
  • The trial court applied an incorrect approach in evaluating evidence. 
  • The appellate court failed to appreciate the evidence in rebuttal. 
  • The acquittal was based on irrelevant grounds, legal errors, or excessive benefit of doubt to the accused. 
• The court found no perversity or lack of evidence against the respondent-accused. The concurrent findings were based on a detailed appraisal of evidence and did not warrant interference. 
• In similar cases, such as M/s Rajco Steel Enterprises v. Kavita Saraff (2024), the court upheld acquittals unless findings were perverse, lacked evidentiary support, or raised legal questions. 
• The appeal against the Karnataka High Court’s judgment dated 3rd March 2023 is dismissed as it lacks merit. The High Court’s findings are affirmed. 
• Any pending applications related to the case are also disposed of.

Conclusion 

• The Supreme Court upheld the concurrent findings of acquittal by both the Trial Court and the High Court, reaffirming the presumption of innocence in favor of the respondent.  
• The Court found no perversity or legal infirmity in the lower courts’ judgments that would justify interference.