This article is written by Amber Tickoo.

This article will contrast the burden of proof under Section 138 of the Negotiable Instruments Act in a cheque bounce case with the burden of proof under a civil recovery suit. In doing so, we will analyse case laws under both criminal and civil law categories. The primary focus in a cheque bounce case under criminal proceeding will be M.S. Narayana Menon v. State of Kerala and Anr. To analyse the burden of proof under civil recovery suits, two cases will be primarily looked at- Bharat Barrel and Drum Manufacturing Company vs. Amin Chand Payrelal and Robert A. Heflin v. Revathi Ramachandran.

Burden of proof under Section 138 proceedings of criminal law

Under Section 139 of the Negotiable Instruments Act, it is presumed that the holder of the cheque received the same in discharge of any debt of liability, in whole or in part. Therefore, a prima facie reading of the section will reveal that a presumption in favour of the complainant is drawn. Even under Section 118(a), there is a presumption that every negotiable instrument made shall be presumed to be drawn for consideration. However, the presumptions drawn under both the provisions are rebuttable in nature. But the question to be asked is what would be the standard of proof for rebutting such a presumption and precedent says that what is needed is to raise a ‘probable defence’.

The court very clearly in M.S Narayana Menon has explained this to mean that the standard of proof for the defendant is preponderance of probabilities and that it is not necessary for the defendant to rely on direct evidence. Inference can be drawn from the materials on record, including the evidence adduced by the plaintiff and also by reference to the circumstances relied on. Therefore, the initial onus of proof to be discharged is that of the accused. But this also does not mean that he/she is required to disprove the case of the prosecution. While the initial burden is on the accused, after producing convincing rebuttal evidence, the presumption disappears and the burden shifts back to the complainant. 

The issue of bringing a civil case standard of proof in a criminal case was discussed in State (Delhi Admin.) v. Sanjay Gandhi where the court justified this logic by stating that whenever a statute raises a presumption of guilt then an accused has a right to rebut that presumption on a defence of preponderance of probabilities. Therefore, an accused under cheque bounce cases is not required to rebut the presumption under Section 139 read with Section 118(a) through the standard of beyond reasonable doubt. 

In M.S. Narayana Menon, the facts were that the accused used to carry out transactions in the Stock Exchange through the complainant and a sum was due to complainant in relation to the said transactions and the cheque issued was dishonoured due to insufficient funds. Court held that the accused was able to discharge the initial burden placed on him but the burden thereafter shifted to the complainant to prove the case. He failed to do so here as he did not produce his books of accounts which would have proved the transaction. Thus the adverse inference drawn against him. 

The standard of proof to rebut the statutory presumption under Section 139 has been reiterated in Rangappa v. Sri Mohan to be that of preponderance of probabilities. 

In the case of Vishnu Dutt Sharma v. Daya Sapra, the court while dealing with the question of whether a criminal proceeding under Section 138 will affect the civil recovery suit proceeding said that the standard of proof in both cases will be very different because in a criminal proceeding the principles of fairness applicable are different and hence statute will be construed strictly. It stated that an accused who discharges the burden of proof placed on him under a statute needs to examine himself. He can discharge the same by relying on the materials already brought on records.Court took note of the fact that the statute mandates raising of presumption but does not explain how the same should be rebutted. It further stated that “reverse burden introduced by Section 139 has to delicately balanced, which would depend on the factual matrix of each case, the materials brought on record and having regard to legal principles governing the same.”

In the case of Kalyani Baskar v. M.S. Sampoornam, the facts were that the accused had made an application to send the cheque for expert opinion to ascertain the genuineness of the signature of the accused but the Magistrate dismissed the application. But the Supreme Court held that declining to send the cheque for examination by handwriting expert meant a denial of the opportunity to the accused to rebut the presumption under Section 139 which amounted to denying a right to a fair trial. 

Logic before M.S. Narayana Menon

However, before M.S. Narayana Menon, it was the logic of Hiten P. Dalal v. Bratindranath Banerjee that guided the courts in examining whether the accused had discharged the burden of proof in cheque bounce cases. This case relied on an earlier case to draw a distinction between ‘discretionary presumption’ and ‘mandatory presumption’ to state that the latter cannot be merely rebutted by showing that the explanation offered by the accused is a reasonable and probable one. What is additionally required to be shown is that the explanation is a true one by directly establishing its existence. Therefore, in the choice between a ‘bare explanation which is plausible’ v. direct evidence, the court chose the latter and was then being applied by the courts is assessing whether the burden of proof under Section 139 had been discharged. 

Lets see how this was applied by the courts: In Yogendra Bhagatram Sachdev v. State of Maharashtra and Anr, the facts were that it was agreed between the complainant and the accused that the complainant will transfer his shares to the accused and resign from the company and in consideration of the same, he should be paid the amount. The cheques of the said amount were issued and later dishonoured. The accused contended that there was no consideration as the shares of the company were in custody of financial institutions which had advanced financial assistance to the company. He produced letters on record to prove the same. The court here held that the accused had only relied on these letters to rebut the presumption under Section 139. He did not examine himself or any witnesses.It stated that the defendant had restricted his defence to the four documents (letters) to prove that the shares were not given to him by the complainant and the same were not in possession and were actually with the financial institutions.

The court held against defendant the fact that he did not lead any evidence apart from the letters and did not press for issuance of witness summons. It was deemed by the court that he gave up his defence. Hiten P. Dalal’s logic was used in the case to press for the need of establishing proof explanation. Therefore, a very strict requirement on the accused for discharging the burden under Section 139 was placed wherein preponderance of probabilities was not enough and direct evidence had to be lead. If this factual matrix had presented itself before the courts today in the post M.S. Narayanan era, the letters on record would have been enough for the accused to show on preponderance of probabilities that the cheque was not given for any consideration. Additionally examining witnesses or producing direct evidence would not have been essential. 

In another case decided by the Bombay High Court, the complainant had given a loan to the accused and cheques had been issued in order to repay the loan. Court held that one of the ways in which presumption under 138 could be rebutted was through cross-examination of the complainant in such a way that it would make it improbable that the cheque was issued in discharge of any debt or liability. The admissions that had been elicited in the cross-examination were considered sufficient to rebut the presumption, probablise his defence and prove the non-existence of a consideration.In this case, the complainant was not able to state in cross-examination when the sum was paid by him and whose money it was and he had been giving contradictory answers. 

Burden of proof under a civil recovery suit

A civil recovery suit is often initiated under Order 37 of the Civil Procedure Code. It deals with summary suits which is the best remedy in the hands of the plaintiff to who wants to institute a civil suit. There are mainly 2 classes of suits on which the order applies- 1) suits upon bills of exchange and promissory notes and (2) ‘suits in which the plaintiff seeks only to recover a debt or liquidated demand in money payable by the defendant, with or without interest’, either in the form of a written contract or through an enactment. It has been well established through case law that a civil case is decided on balance of probabilities. While that remains the standard of proof for the second category of suits, the first category of recovery suits (upon BoE and promissory notes) will have a different standard of proof which will be governed by Section 118 of the Negotiable Instruments act. This is because such suits arise out of negotiable instruments and thus will be governed by the presumptions that are applicable to negotiable instruments under Section 118.  

Recovery suits arising out of Negotiable Instruments

Section 118 is quite similar to Section 139 which raises a statutory presumption regarding consideration in cheque dishonour cases. Section 118(a) states that ‘until anything to the contrary is proved, it shall be presumed that every negotiable instrument was drawn for consideration.’ 

In the case of Bharat Barrel and Drum Manufacturing Company vs. Amin Chand Payrelal, the court held that this presumption under Section 118(a) is rebuttable in nature and and a probable defence can be raised to prove the non-existence of such consideration. It is adequate if the defence shows that the existence of such consideration is doubtful or improbable from the facts and circumstances of the case or the material on record. It does not need to lead direct evidence for rebutting such a presumption. This is the same as what was held by the court in M.S. Narayana Menon though under a criminal cheque-bounce case.

The facts in Bharat Barrel were that the parties had a transaction of import of steel drum sheets and the defendant agreed to import the same which the plaintiff accepted. It was conveyed to the defendant that unless a guarantee about timely delivery of goods could be made, a letter of credit would not be opened. Plaintiff then asked the defendant to execute a promissory note as collateral security to pay to the plaintiff in case he suffers due to any default on part of the defendant. The defendant had shown that there was no existence of consideration for the promissory note that he issued and thus was not enforceable on the defendant. But this did not convince the High Court. The court decided in favour of the plaintiff because it said that it was wrong on part of the High Court to first not accept the defendant’s evidence while disproving consideration of the promissory note but then at the same time shifted the onus of proof of legal presumption on the plaintiff.

Other recovery suits

When civil recovery suits are filed under Order 37 of the CPC then the burden is on the plaintiff to establish the case through preponderance of probabilities. In the case of Robert A. Heflin v. Revathi Ramachandran, the plaintiff and the defendant had entered into an agreement by which plaintiff would supply industrial diamond and the price would be paid by the defendants in a mutual open account. While some of the amount had been paid, a large amount remained and thus a civil suit for recovery of the outstanding amount was filed. The court said that the invoices relied on by the plaintiff which covered the transactions of the industrial diamond was not referred to in the plaint and were also not in the pre-suit notice and the replication statement Additionally, it was admitted by the plaintiff that there was no acknowledgement of the receipts of the diamonds by the defendants. The court also held that the truth of the invoices were required to be corroborated through some other evidence as well. 

To decide a civil suit on preponderance of probabilities, court has to take into account the pleadings and evidence on record of both sides.

Conclusion

The contrast and comparison between the above two scenarios can be briefly summarised as under. 

Criminal case of cheque bounce: 

• Initial burden- Defendant; standard- preponderance of probabilities.

Civil recovery suit: 

• Suits on negotiable instruments 

 Initial burden- Defendant; standard- preponderance of probabilities.

• Suits in discharge of debt or liquidated demand

Initial burden- Plaintiff; standard- preponderance of probabilities.

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