Case Title: Rohitbhai Jivanlal Patel v. State of Gujrat & Anr.
According to the Supreme Court, if the accused is unable to disprove the presumption that a legally enforceable debt exists in accordance with Section 139 of the Negotiable Instruments Act, elements like the source of cash are irrelevant.
The case involved the dishonour of 7 cheques, each for Rs. 3 lakhs. The argument of the accused was that the complainant misappropriated the cheques since they were sent to his acquaintance, with whom the accused had financial arrangements, rather than the complainant. Based on the accused's admission that he signed the cheques, the trial court derived the assumption that they were written for a debt that was legally collectable. The trial court nevertheless continued to rule that the transaction was not recorded in records or income tax returns, that there was no legal proof to demonstrate the source of the money, etc. Based on these conclusions, the trial court determined that the complainant's case was not proven and granted the accused's acquittal.
The Trial Court came to the conclusion that the accused had successfully raised the rebuttal evidence to the required preponderance of probabilities and noted that the complainant had failed to establish beyond a shadow of a doubt that the cheques were issued in partial payment of the loan amount of Rs. 22,50,000/-. Therefore, each of the seven complaint instances was dismissed.
In response to the complainant's appeal against conviction, the High Court criticised the trial court. According to the High Court, if the relevant transaction was not recorded in the accounts and income-tax returns, the lender would at most be subject to income-tax law enforcement action; however, if the complainant is successful in proving the lending of the relevant amount, the presence of a legally enforceable debt cannot be rejected.
The Accused filed his petition before the Apex Court against the Hon’ble High Court’s Judgment wherein it overturned the verdict of the Trial Court. The Apex Court observed that even after allegedly drawing the assertion under Section 139 of the NI Act in the current case, the Trial Court continued to raise concerns about the complainant's lack of proof regarding the source of funds for the loan he advanced to the accused as well as his failure to question any pertinent witnesses who may have given him money in exchange for the loan. The Trial Court's strategy had been in conflict with the legal presumption standards. The Apex Court by relying on the case of Kumar Exports v. Sharma Carpets stated that the accused might refute the assumption under Section 139 of the NI Act by demonstrating a gap in the complainant's evidence rather than by providing direct proof. However, the court cannot cast doubt on the complainant's case if the accused fails to submit any evidence to counter the assumption.
The Apex Court took notice of the defence, which contended that the complaint was made by misusing the cheques that the accused had handed to an acquaintance of the complainant. This defence was considerably lacking in factual support. It should be observed that the accused did not present any evidence proving that the complainant lacked the financial ability to lend the funds. The debate in the preceding paragraphs has led to the conclusion that the Trial Court made a fundamental error in judgement by proceeding as though the complainant needed to establish his case beyond a reasonable doubt, even after forming the presumption.