Offences under the Negotiable Instrument Act can be proved even when the source of income from the complainant is not disclosed in matters of debt repayment. This was decided by Hon’ble Justice P.N Desai of the High court of Karnataka in Mohan Kumar vs. Syed Mohd Ali [Criminal Appeal 200033 of 2014].
In this case of appeal, the appellant is the actual complainant of the case decided in Trial Court. There existed a fiduciary relationship between the appellant and the defendant. The appellant advanced a loan of about Rs.10 Lakhs to the accused, on account of good friendship. However, after multiple reminders and sending a legal notice, the accused failed to repay the debt. Therefore complaint was filed against the accused under Section 136 of the Negotiable Instruments Act, 1881. The lower courts acquitted the accused because the source of payment of the amount and presence of any person during the said payment by the appellant was not proved. The Trial court also found that it was violative of Section 269 of the Income Tax Act.
In the instant case, the accused took the defense that there is no legally enforceable liability on him. He used the absence of any security documents for the transaction to validate this contention. The defense also accused the appellant of running a chit business and that the blank check issued was misused by him.
The counsel for the defense, on the other hand, stated that presumption under Section 114 of the Indian Evidence Act and 139 of the Negotiable Instruments Act was available to the appellant. Further, the appellant produced documents of plot ownership thereby suggesting the capacity of the appellant to lend a loan of a huge amount to the defendant. Reliance mas also made on recent cases of Supreme Court like the AIR 2020 SC 945 APS Forex Services Pvt. Ltd., vs. Shakti International Linkers and others.
The court categorically stated when there are insufficient funds then there is a statutory presumption in favour of the holder of the cheque that it is dishonoured. The burden to rebut is on the accused and not on the appellant. It further stated that an Issue of debt is no precondition to remove the presumption under section 139 of the Negotiable Instruments Act.
It referred to the landmark judgment of the Supreme Court with a similar set of facts that is AIR 2012 SC 1876 Rohitbhai Jivanlal Patel vs State of Gujurat and another. Here, it was held here that “the trial court suffered from perversity and fundamental error of approach. The observations of the Trial Court that there was no documentary evidence to show the source of funds with the respondent to advance loan would have been relevant if the matter was to be examined beyond a reasonable doubt.”
The Court finally decided in favor of the appellant saying that the observation made by lower courts do not nullify the presumption existing in favor of the complainant by virtue of Sections 118 and 139 of the NI Act.