139. Presumption in favour of holder. โIt shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.
It is a settled proposition of law that presumption under Section 139 of the Negotiable Instruments Act is a presumption of law, as distinguished from a presumption of fact, such a presumption is a rebuttable presumption and the drawer of the cheque may dispel the same. The aforesaid position in law stands settled in the judgment of the Hon’ble Supreme Court in the matter of Hiten P. Dalal Vs. Bratindranath Banerjee (2001) 6 SCC 16. While dealing with the aspect of presumption in terms of Section 139 of the Negotiable Instruments Act, the Hon’ble Supreme Court observed as under:-
’21.The appellant’s submission that the cheques were not drawn for the ‘discharge in whole or in part of any debt or other liability’ is answered by the third presumption available to the Bank underย Section 139ย of the Negotiable Instruments Act. This section provides that “it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to inย Section 138ย for the discharge, in whole or in part, of any debt or other liability”. The effect of these presumptions is to place the evidential burden on the appellant of proving that the cheque was not received by the Bank towards the discharge of any liability.
22. Because bothย Sections 138ย andย 139ย require that the Court “shall presume” the liability of the drawer of the cheques for the amounts for which the cheques are drawn, as noted inย State of Madras vs. A. Vaidyanatha Iyerย AIR 1958 SC 61, it is obligatory on the Court to raise this presumption in every case where the factual basis for the raising of the presumption had been established. “It introduces an exception to the general rule as to the burden of proof in criminal cases and shifts the onus on to the accused” (ibid). Such a presumption is a presumption of law, as distinguished from a presumption of fact which describes provisions by which the court “may presume” a certain state of affairs. Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable possibility of the non- existence of the presumed fact.
Section 139 of the Act provides that it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.
15. Presumptions are devices by use of which the courts are enabled and entitled to pronounce on an issue notwithstanding that there is no evidence or insufficient evidence. Under the Indian Evidence Act all presumptions must come under one or the other class of the three classes mentioned in the Act, namely, (1) “may presume” (rebuttable), (2) “shall presume” (rebuttable) and (3) “conclusive presumptions” (irrebuttable). The term `presumption’ is used to designate an inference, affirmative or disaffirmative of the existence a fact, conveniently called the “presumed fact” drawn by a judicial tribunal, by a process of probable reasoning from some matter of fact, either judicially noticed or admitted or established by legal evidence to the satisfaction of the tribunal. Presumption literally means “taking as true without examination or proof”.
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16. Section 4 of the Evidence Act inter-alia defines the words `may presume’ and `shall presume as follows: –
“(a) `may presume’ – Whenever it is provided by this Act that the Court may presume a fact, it may either regard such fact asย
proved, unless and until it is disproved or may call for proof of it.
(b) `shall presume’ – Whenever it is directed by this Act that the Court shall presume a fact, it shall regard such fact as proved, unless and until it is disproved.”
In the former case the Court has an option to raise the presumption or not, but in the latter case, the Court must necessarily raise the presumption. If in a case the Court has an option to raise the presumption and raises the presumption, the distinction between the two categories of presumptions ceases and the fact is presumed, unless and until it is disproved.
Section 118 of the Act inter alia directs that it shall be presumed, until the contrary is proved, that every negotiable instrument was made or drawn for consideration. Section 139 of the Act stipulates that unless the contrary is proved, it shall be presumed, that the holder of the cheque received the cheque, for the discharge of, whole or part of any debt or liability.
ย Applying the definition of the word `proved’ in Section 3 of the Evidence Act to the provisions of Sections 118 and 139 of the Act, it becomes evident that in a trial under Section 138 of the Act a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under Sections 118 and 139 of the Act help him shift the burden on the accused. The presumptions will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists.
The use of the phrase “until the contrary is proved” in Section 118 of the Act and use of the words “unless the contrary is proved” in Section 139of the Act read with definitions of “may presume” and “shall presume” as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over.
The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of the complainant in a criminal trial. The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused.
The accused has also an option to prove the non-existence of consideration and debt or liability either by letting in evidence or in some clear and exceptional cases, from the case set out by the complainant, that is, the averments in the complaint, the case set out in the statutory notice and evidence adduced by the complainant during the trial. Once such rebuttal evidence is adduced and accepted by the court, having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the complainant and, thereafter, the presumptions under Sections 118 and 139 of the Act will not again come to the complainant’s rescue.’
In the matter of John K. Abraham Vs. Simon C. Abraham And Another (2014) 2 SCC 236, the Hon’ble Supreme Court observed that in order to draw presumption under Section 118 read with Section 139 of the Negotiable Instruments Act, burden lies on the complainant to show, (i) that he had the requisite funds for advancing the sum of money/loan in question to the accused, (ii) that the issuance of cheque by accused in support of repayment of money advanced was true and, (iii) that the accused was bound to make payment as had been agreed while issuing cheque in favour of the complainant.
Applying the definitions of “proved” or “disproved” to the principle behind Section 118(a)of the Act, the court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non- existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.
In K. Bhaskaran vs. Sankaran Vaidhyan Balan & Anr.(1999) 7 SCC 510 wherein it is held as hereunder:
“9. As the signature in the cheque is admitted to be that of the accused, the presumption envisaged in Section 118 of the Act can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears. Section 139 of the Act enjoins on the Court to presume that the holder of the cheque received it for the discharge of any debt or liability. The burden was on the accused to rebut the aforesaid presumption.
In M.M.T.C. Ltd. and Anr. v. Medchl Chemicals & Pharma (P) Ltd. : (2002) 1 SCC 234 (Para. 19):
” …The authority shows that even when the cheque is dishonoured by reason of stop payment instruction, by virtue of Section 139 the Court has to presume that the cheque was received by the holder for the discharge in whole or in part, of any debt or liability. Of course this is a rebuttable presumption. The accused can thus show that the `stop payment’ instructions were not issued because of insufficiency or paucity of funds. If the accused shows that in his account there was sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the drawer bank and that the stop payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, then offence under Section 138 would not be made out. The important thing is that the burden of so proving would be on the accused….
In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an Accused has to rebut the presumption Under Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the Accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the Accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the Accused may not need to adduce evidence of his/her own.
