Burden of Proof and Presumptions under Section 139 of Negotiable Instruments Act, 1881 (NI Act): Conceptual Underpinnings
A. Burden of Proof and Presumptions: Conceptual Underpinnings
- Type of burden of proof: There are two senses in which the phrase ‘burden of proof’ is used in the Indian Evidence Act, 1872. One is the burden of proof arising as a matter of pleading and the other is the one which deals with the question as to who has first to prove a particular fact. The former is called the ‘legal burden’ and it never shifts, the latter is called the ‘evidential burden’ and it shifts from one side to the other. [See Kundanlal v. Custodian Evacuee Property (AIR 1961 SC 1316)].
- Legal Burden: The legal burden is the burden of proof which remains constant throughout a trial. It is the burden of establishing the facts and contentions which will support a party’s case. If, at the conclusion of the trial a party has failed to establish these to the appropriate standards, he would lose to stand. The incidence of the burden is usually clear from the pleadings and usually, it is incumbent on the plaintiff or Complainant to prove what he pleaded or contends.
- Evidential Burden: On the other hand, the evidential burden may shift from one party to another as the trial progresses according to the balance of evidence given at any particular stage; the burden rests upon the party who would fail if no evidence at all, or no further evidence, as the case may be is adduced by either side (See Halsbury’s Laws of England, 4th Edition para 13). While the former, the legal burden arising on the pleadings is mentioned in Section 101 of the Evidence Act, the latter, the evidential burden, is referred to in Section 102 thereof. [G.Vasu V. Syed Yaseen (AIR 1987 AP139) affirmed in Bharat Barrel Vs. Amin Chand [(1999) 3 SCC 35] ].
- Presumption and types of presumptions: Presumption literally means “taking as true without examination or proof”. In Kumar Exports v. Sharma Exports (2009) 2 SCC 513, this Court referred to presumption as “devices by use of which courts are enabled and entitled to pronounce on an issue notwithstanding that there is no evidence or insufficient evidence.” Broadly speaking, presumptions are of two kinds, presumptions of fact and presumptions of law.
- Presumptions of fact are inferences logically drawn from one fact as to the existence of other facts. Presumptions of fact are rebuttable by evidence to the contrary.
- Presumptions of law may be either irrebuttable (conclusive presumptions), so that no evidence to the contrary may be given or rebuttable. A rebuttable presumption of law is a legal rule to be applied by the Court in the absence of conflicting evidence.
- Among the class of rebuttable presumptions, a further distinction can be made between discretionary presumptions (‘may presume’) and compulsive or compulsory presumptions (‘shall presume’). [G.Vasu V. Syed Yaseen (AIR 1987 AP139) affirmed in Bharat Barrel Vs. Amin Chand (1999) 3 SCC 35].
- The Evidence Act provides for presumptions, which fit within one of three forms: ‘may presume‘ (rebuttable presumptions of fact), ‘shall presume‘ (rebuttable presumption of law) and conclusive presumptions (irrebuttable presumption of law). The distinction between ‘may presume‘ and ‘shall presume‘ clauses is that, as regards the former, 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.
B. Section 139 NI Act-Effect of Presumption and Shifting of Onus of Proof
- The NI Act provides for two presumptions: Section 118 and Section 139.
- 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’.
- It will be seen that the ‘presumed fact‘ directly relates to one of the crucial ingredients necessary to sustain a conviction under Section 138. [The rules discussed hereinbelow is common to both the presumptions under Section 139 and Section 118 and is hence, not repeated-Reference to one can be taken as reference to another.]
- Section 139 of the NI Act, which takes the form of a ‘shall presume’ clause is illustrative of a presumption of law. Because Section 139 requires that the Court ‘shall presume’ the fact stated therein, 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. But this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary as is clear from the use of the phrase ‘unless the contrary is proved’.
- The Court will necessarily presume that the cheque had been issued towards discharge of a legally enforceable debt/liability in two circumstances.
- Firstly, when the drawer of the cheque admits issuance/execution of the cheque and
- Secondly, in the event where the Complainant proves that cheque was issued/executed in his favour by the drawer. The circumstances set out above form the fact(s) which bring about the activation of the presumptive clause. [Bharat Barrel Vs. Amin Chand] [(1999) 3 SCC 35].
- Recently, this Court has gone to the extent of holding that presumption takes effect even in a situation where the accused contends that ‘a blank cheque leaf was voluntarily signed and handed over by him to the Complainant. [Bir Singh v. Mukesh Kumar (2019) 4 SCC 197]. Therefore, mere admission of the drawer’s signature, without admitting the execution of the entire contents in the cheque, is now sufficient to trigger the presumption.
- As soon as the Complainant discharges the burden to prove that the instrument, say a cheque, was issued by the accused for discharge of debt, the presumptive device under Section 139 of the Act helps shifting the burden on the accused. The effect of the presumption, in that sense, is to transfer the evidential burden on the accused of proving that the cheque was not received by the Bank towards the discharge of any liability. Until this evidential burden is discharged by the accused, the presumed fact will have to be taken to be true, without expecting the complainant to do anything further.
- The standard of proof to discharge this evidential burden is not as heavy as that usually seen in situations where the prosecution is required to prove the guilt of an accused. The accused is not expected to prove the non-existence of the presumed fact beyond reasonable doubt. The accused must meet the standard of ‘preponderance of probabilities’, similar to a defendant in a civil proceeding. [Rangappa vs. Mohan (AIR 2010 SC 1898)].
C. Rebut the presumption and prove to the contrary
- In order to rebut the presumption and prove to the contrary, it is open to the accused to raise a probable defence wherein the existence of a legally enforceable debt or liability can be contested.
- The words ‘until the contrary is proved’ occurring in Section 139 do not mean that accused must necessarily prove the negative that the instrument is not issued in discharge of any debt/liability but the accused has the option to ask the Court to consider the non-existence of debt/liability so probable that a prudent man ought, under the circumstances of the case, to act upon the supposition that debt/liability did not exist. [Basalingappa Vs. Mudibasappa (AIR 2019 SC 1983) See also Kumar Exports Vs. Sharma Carpets (2009) 2 SCC 513].
- In other words, the accused is left with two options.
- The first option-of proving that the debt/liability does not exist-is to lead defence evidence and conclusively establish with certainty that the cheque was not issued in discharge of a debt/liability.
- The second option is to prove the non-existence of debt/liability by a preponderance of probabilities by referring to the particular circumstances of the case. The preponderance of probability in favour of the accused’s case may be even fifty one to forty nine and arising out of the entire circumstances of the case, which includes:
- the Complainant’s version in the original complaint,
- the case in the legal/demand notice,
- Complainant’s case at the trial,
- as also the plea of the accused in the reply notice,
- his 313 statement or
- at the trial as to the circumstances under which the promissory note/cheque was executed.
All of them can raise a preponderance of probabilities justifying a finding that there was ‘no debt/liability’. [Kumar Exports and Sharma Carpets, (2009) 2 SCC 513].
D. Shifting of Onus of Proof/burden of proof to the Complainant
- Once the accused adduces evidence to the satisfaction of the Court that on a preponderance of probabilities there exists no debt/liability in the manner pleaded in the complaint or the demand notice or the affidavit-evidence, the burden shifts to the Complainant and the presumption ‘disappears’ and does not haunt the accused any longer. The onus having now shifted to the Complainant, he will be obliged to prove the existence of a debt/liability as a matter of fact and his failure to prove would result in dismissal of his complaint case. Thereafter, the presumption under Section 139 does not again come to the Complainant’s rescue. Once both parties have adduced evidence, the Court has to consider the same and the burden of proof loses all its importance. [Basalingappa vs. Mudibasappa, AIR 2019 SC 1983; See also, Rangappa vs. Sri Mohan (2010) 11 SCC 441].
- Once the presumption under Section 139 was given effect to, the Courts ought to have proceeded on the premise that the cheque was, indeed, issued in discharge of a debt/liability. The entire focus would then necessarily have to shift on the case set up by the accused, since the activation of the presumption has the effect of shifting the evidential burden on the accused. The nature of inquiry would then be to see whether the accused has discharged his onus of rebutting the presumption. If he fails to do so, the Court can straightaway proceed to convict him, subject to satisfaction of the other ingredients of Section 138. If the Court finds that the evidential burden placed on the accused has been discharged, the Complainant would be expected to prove the said fact independently, without taking aid of the presumption. The Court would then take an overall view based on the evidence on record and decide accordingly.
- At the stage when the courts concluded that the signature had been admitted, the Court ought to have inquired into either of the two questions (depending on the method in which accused has chosen to rebut the presumption): Has the accused led any defense evidence to prove and conclusively establish that there existed no debt/liability at the time of issuance of cheque? In the absence of rebuttal evidence being led the inquiry would entail: Has the accused proved the nonexistence of debt/liability by a preponderance of probabilities by referring to the ‘particular circumstances of the case’?.
Case Reference: Rajesh Jain Vs. Ajay Singh dated 09.10.2023, reported at (2023) ibclaw.in 112 SC.
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