S.139 NI Act | When Complainant Proves That Check Was Issued By Accused To Discharge Debt, Burden Transfers To Accused: J&K High Court

The accused must then prove that the check was not issued for the purpose of fulfilling any obligation, and unless this burden of proof is discharged by the accused, the presumed fact must be accepted as true, without waiting for the complainant to do anything further,” one bench explained. Justice Javed Iqbal Wani.

The court made these observations while dismissing the appeal filed by one Choudhary Piara Singh against the order of acquittal passed by the Trial Court in a check maintenance case under Section 138 of the NI Act.

Complainant Singh, managing director of Good Luck Finance Corporation, alleged that the defendant Sat Pal had taken a loan for the purchase of a truck but defaulted in repayment. Following this, an agreement was allegedly reached in 2007, resulting in the issuance of the disputed check.

When the check bounced, Singh took legal action. However, the Trial Court acquitted Sat Pal, accepting his defense that the check was issued as a blank, signed document held as security for the loan, rather than as final payment for outstanding obligations.

Aggrieved, Singh appealed and argued that Sat Pal’s agreement to issue the cheque bearing his signature created a presumption of liability under Sections 118 and 139 of the NI Act. In response, Sat Pal alleged that the check was blank, undated, provided only as collateral when the loan was granted in 1999 and was later misused by the complainant.

Observations of the Court:

After considering the rival arguments, Justice Wani upheld the acquittal, basing his decision on the legal framework of Section 139 of the Act. He stated: “Section 139 of the 1881 Act states, ‘Unless the contrary is proved, it shall be presumed that the bearer of the check has received the check in satisfaction of the whole or any part of any debt or obligation.’

The Court also emphasized that the phrase “I will assume” implies a presumption of law, obliging the Court to uphold the presumption in every case where the factual basis has been established, although the defendant may still rebut it by presenting counter-evidence.

Justice Wani quoted the following in support of the principles regarding the burden of proof: Rangappa / Sri Mohan And Basalingappa / Mudibasappa This sets the standard of proof required to rebut the presumption under Section 139, which is lower than the strict “beyond reasonable doubt” threshold and operates on the principle of “preponderance of probabilities”. The Court emphasized that the defendant may challenge the existence of liability by presenting circumstantial evidence that would convince the Court of the improbability of the alleged debt.

The court also carefully examined the evidence showing that the check in question was issued blank as collateral at the time the loan was granted, and therefore did not imply any liability regarding the debt.

Justice Wani observed:

“The check in question, although signed by him, was blank even though it had no date on it, and this check was retained by the complainant/plaintiff on the relevant date as collateral against the loan used by the accused/defendant. ”

Highlighting the inconsistencies in the complainant’s testimony, the Court questioned the basis for the alleged debt amount and noted the following: “How is the amount of Rs. 8,32,909/- under the said check was issued by the accused/defendant to be paid to the complainant/appellant is nothing but a secret.”

The court highlighted that the complainant failed to show how the outstanding amount allegedly reached the disputed figure of Rs. 8,32,909/-, especially in view of the absence of supporting documents or any record of the alleged 2007 agreement.

In conclusion, Justice Wani observed that since both the parties had adduced substantial evidence, it was necessary for the Trial Court to dismiss the complaint. It confirmed that the complainant had failed to convincingly establish a legally enforceable debt and concluded that the Trial court could not be said to be at fault in this regard or to have committed any illegality or perversion.

As a result, the objection was rejected.

Case Title: Chowdhary Piara Singh Vs Sat Pal

Quote: 2024 LiveLaw (JKL) 296

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