Complaint need not prove source of funds under NI Act once is on the accused to deny accusation

In CRIMINAL APPEAL NO. 508 OF 2019, ROHITBHAI JIVANLAL PATEL vs STATE OF GUJARAT, after examining the record, the Trial Court found that the accused had admitted his signature on the cheques and, with reference to the decision of this Court in the case of Rangappa v. Sri Mohan drew the presumption envisaged by Section 139 of NI Act. However, after having drawn the presumption, the Trial Court found several factors in favour of the accused and observed, inter alia, that there was no documentary evidence to show the source of income for advancing the loan to the accused.

After the High Court overturned the trial court order and matter reached the Supreme Court. The Supreme Court opined that the basic questions to be addressed to are two-fold: as to whether the complainant-respondent No. 2 had established the ingredients of Sections 118 and 139 of the NI Act,

so as to justify drawing of the presumption envisaged therein; and if so, as to whether the accused-appellant had been able to displace such presumption and to establish a probable defence whereby, the onus would again shift to the complainant?

The Supreme Court held that since the accused-appellant could not deny his signature on the cheques in question that had been drawn in favour of the complainant on a bank account maintained by the accused, all the basic ingredients of Section 138 as also of Sections 118 and 139 are apparent on the face of the record. The onus, therefore, shifts on the accused-appellant to establish a probable defence so as to rebut such a presumption. On the aspects relating to preponderance of probabilities, the accused has to bring on record such facts and such circumstances which may lead the Court to conclude either that the consideration did not exist or that its non-existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that the consideration did not exist and mere denial would not fulfil the requirements of rebuttal as envisaged under Section 118 and 139 of the NI Act which the accused failed to do.

In view of the circumstances, the Supreme Court decided that the observations of the Trial Court that there was no documentary evidence to show the source of funds with the respondent to advance the loan, or that the respondent did not record the transaction in the form of receipt of even kachcha notes, or that there were inconsistencies in the statement of the complainant and his witness, or that the witness of the complaint was more in know of facts etc. would have been relevant if the matter was to be examined with reference to the onus on the complaint to prove his case beyond reasonable doubt. These considerations and observations do not stand in conformity with the presumption existing in favour of the complainant by virtue of Sections 118 and 139 of the NI Act.