JUDGMENT : This appeal is filed to set aside the judgment and order of acquittal dated 21.04.2009 passed in Crl.A. No.117/2008 by the XXXVI Additional City Civil & Sessions Judge, Bangalore, for the offence punishable under Section 138 of Negotiable Instruments Act and to restore the judgment of conviction and sentence dated 10.01.2008 passed in C.C. No.17243/2005 by the XV Additional Chief Metropolitan Magistrate, Bengaluru and to convict the respondents for the aforesaid offence in accordance with law. 2. The genesis of the litigation in the present appeal is that a complaint under Section 138 of the Negotiable Instruments Act was filed by the complainant before the XV Additional Chief Metropolitan Magistrate, Bengaluru. The learned Magistrate had found the respondents / accused guilty and sentenced them to pay a fine amount of Rs.6,30,000/-and further ordered that out of the recovered fine amount, a sum of Rs.6,25,000/-shall be paid to the complainant as compensation and balance amount of Rs.5,000/-shall go to the State. In the event of default of payment of fine amount by the accused Nos.2 and 3, they shall undergo simple imprisonment for a period of one year each. 3. The order of conviction passed by the learned Magistrate was challenged in the appeal before the XXXVI Additional City Civil & Sessions Judge (CCH-37), Bengaluru. Said appeal was allowed. The findings and order of conviction passed by the trial court was set aside. Being aggrieved by the order of acquittal passed by the first appellate court, the complaint has preferred the appeal. 4. The case of the complainant is that the accused Nos.2 and 3 being the Managing Director and Director of accused No.1 Company had availed hand loan of Rs.6,00,000/-from the complainant because of their financial difficulties and they had issued three postdated cheques all dated 13.01.2005 for a sum of Rs.2,00,000/-each drawn on Canara Bank, Avenue Road branch, Bengaluru, in favour of the complainant. The said cheques were presented for encashment, but they were returned with an endorsement “Account closed”. Therefore, the complainant got issued a legal notice dated 25.01.2005. On receiving the said notice, the accused have given untenable reply and have failed to pay the amount, thereby they have committed the offence punishable under Section 138 of the N.I. Act. 5. Before the trial court, the complainant got examined himself as PW1 and got marked documents as per Exhibits-P1 to P17. On receiving the said notice, the accused have given untenable reply and have failed to pay the amount, thereby they have committed the offence punishable under Section 138 of the N.I. Act. 5. Before the trial court, the complainant got examined himself as PW1 and got marked documents as per Exhibits-P1 to P17. After recording of 313 statement, the accused No.2 got examined as DW1 and witnesses were examined as DW3 and DW4. Documents were got marked as per Exhibits-D1 to D16. 6. The trial court on analysis of the evidence adduced by the respective parties arrived at a factual finding that the accused had duly issued the cheques in question for Rs.2,00,000/-each in favour of the complainant in discharge of their debt or liability. The said cheques were presented to the Bank for payment within the period of its validity, but the cheques have been returned unpaid on the reason that the account was closed. Thereafter, the statutory notice of dishonor was duly issued, for which, reply was given by the respondents / accused and further held that there is no convincing rebuttal evidence by the accused that there was no debt or liability. The complainant has established that the accused had issued cheques, but they have failed to make the payment despite service of legal notice. 7. Being aggrieved by the order of conviction passed by the trial Court, the accused had preferred appeal. On re-appreciation of evidence, the first appellate court has come to the conclusion that the accused have probablized the defense by placing cogent evidence and have successfully rebutted the presumption under Section 139 of the Negotiable Instruments Act. With this observation, the first appellate court allowed the appeal and the order of conviction passed by the trial court was set aside. 8. Heard learned counsels for the parties and perused the records. 9. It is the contention of the learned counsel for the appellant that the first appellate court has committed error in disbelieving the evidence of the complainant. The accused having admitted the issuance of cheques and signatures have failed to make the payment. Hence, the trial court has dismissed the complaint as there is ample evidence to draw the presumption under Section 139 of N.I. Act. The accused cannot contend that there was no legally enforceable debt. The accused having admitted the issuance of cheques and signatures have failed to make the payment. Hence, the trial court has dismissed the complaint as there is ample evidence to draw the presumption under Section 139 of N.I. Act. The accused cannot contend that there was no legally enforceable debt. The onus shifts on the accused to rebut the presumption that the cheques were not issued for discharge of any debt or liability in terms of Section 138 of N.I. Act. There is convincing evidence to prove that the findings given by the trial court are proper and justified. 10. The learned counsel for the respondents / accused argued in support of the impugned judgment of acquittal passed by the first appellate court contending that the complainant has failed to establish that the cheques were issued towards payment of legally enforceable debt, thus the first appellate court was justified in dismissing the complaint. Exhibits-P1, P2 and P3 – cheques are signed by respondent No.2 / accused as Managing Director of respondent No.1 Company, but respondent No.2 has expired. The respondent No.3 is not a Director of respondent No.1 Company and he is not a signatory to the cheques. The said cheques were given as security while purchasing silk items. The respondent No.2 has given reply to the legal notice as per Exhibit-D8. PW1 has admitted in the cross-examination regarding payment done by the accused. There is no evidence whatsoever to hold that the cheques were issued towards payment of legally payable debt. Thus, the appeal deserves to be dismissed. 11. Having heard the submissions of the learned counsels for both parties, the question that would arise for consideration of this Court would be: Whether the first appellate court was justified in dismissing the complaint on the reason that the cheques were not issued towards legally enforceable debt? 12. In a decision reported in 2019 (5) SCC 418 in the case of Basalingappa vs. Mudibasappa, the Hon’ble Apex Court has observed as under: “21. After referring to various other judgments of this Court, this Court in Rangappa case held that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability, which, of course, is in the nature of a rebuttable presumption. In para 26, the following was laid down: (Rangappa case, SCC p. 453) “26. In para 26, the following was laid down: (Rangappa case, SCC p. 453) “26. In light of these extracts, we are in agreement with the respondent-claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat [Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54 : (2008) 2 SCC (Cri) 166] may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant.” 22. Elaborating further, this Court in Rangappa case held that Section 139 of the Act is an example of a reverse onus and the test of proportionality should guide the construction and interpretation of reverse onus clauses on the defendant-accused and the defendant-accused cannot be expected to discharge an unduly high standard of proof. In paras 27 and 28, the following was laid down: (Rangappa case SCC pp. 453-54) “27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high standard of proof. 28. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high standard of proof. 28. 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.” On referring to some of the decisions, the Hon’ble Apex Court has held that: “25.1. Once the execution of cheque is admitted Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability. 25.2. The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities. 25.3. To rebut the presumption, it is open for the accused to rely on evidence led by him or the accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely.” 13. In the present case, it is the specific defense of the respondents / accused that there were business dealings between the complainant and accused regarding supply of silk waste materials. In that connection, the accused had issued three blank cheques on 15.09.1999. In the year 2000, the complainant supplied three consignments as per Exhibits-D1 to D3 and the amount of the said consignments was paid by the accused through cheques. In that connection, the accused had issued three blank cheques on 15.09.1999. In the year 2000, the complainant supplied three consignments as per Exhibits-D1 to D3 and the amount of the said consignments was paid by the accused through cheques. After making payment through cheques, the accused had called upon the complainant to return the cheques given as security, but the complainant failed to return the said cheques on the pretext that the cheques were misplaced. Then the accused closed the bank account in the month of April 2000 and the closure of the account was intimated to the complainant as per Exhibit-D8 under Certificate of Posting (Exhibit-D9). The accused has also given reply to the demand notice of the complainant as per Exhibit-D10. 14. The complainant had filed affidavit in lieu of examination-in-chief reiterating the averments made in the complaint. In the cross-examination, the complainant has admitted that the accused No.3 has not signed Exhibits-P2 to P4 – cheques. Further, he has stated that in the month of July 2004, he had given loan of Rs.6,00,000/-in cash, but he has admitted that the said amount given to the accused is not shown in his Income Tax Returns. Further, it has come in evidence that the complainant had closed his Company -M/s. K.G. Silks in the year 2001 and he had supplied degummed silk waste three times in the year 2000 to the accused Company and the accused have made payment in respect of said three credit bills through cheques. In further cross-examination, he has clearly admitted that there is no dues or amount payable towards the supply of degummed silk in three consignments. The admission of PW1 confirms that there was no arrears of amount payable in the business transactions. There is no convincing evidence to show that the accused had borrowed Rs.6,00,000/-in July 2004. 15. The accused No.2 has filed affidavit in lieu of oral evidence and got examined as DW1. He has produced 16 documents which are marked as Exhibits-D1 to D16. It is pertinent to note that in Exhibit-D6, DW1 has denied some of the suggestions made by the complainant in the cross-examination. Nothing is elicited to prove that DW1 had borrowed the loan from the complainant apart from business transactions. 16. He has produced 16 documents which are marked as Exhibits-D1 to D16. It is pertinent to note that in Exhibit-D6, DW1 has denied some of the suggestions made by the complainant in the cross-examination. Nothing is elicited to prove that DW1 had borrowed the loan from the complainant apart from business transactions. 16. DW2 and DW4 have stated in their affidavit evidence that the complainant had agreed to supply silk waste materials on credit basis and against credit sale in favour of accused No.1 Company -M/s. Pearl Valley Silks Ltd., and the accused No.2 handed over three blank cheques to the complainant as security towards credit supply of silk waste material. Both witnesses have been cross-examined, but noting is elicited to prove that the said three cheques were issued towards legally payable debt. 17. DW3 – Manager of Canara Bank, Avenue Road branch, Bengaluru, has stated that the accused had current account in the name of the Company– M/s. Pearl Valley Silks Ltd. The account number was 50240. On 10.04.2000, the accused Company had written a letter to close the account and as per the said letter, the account was closed. In the cross-examination, he has stated that in Exhibit-D16, there are details about the unused cheques returned by the accused and the accused had not informed the Bank about the misuse of three chques given to the complainant as security. 18. It is pertinent to note that even though the complainant had earlier denied any business transactions between him and the accused, later he has admitted in the cross-examination about the transactions in the year 2000 regarding supply of silk waste material. Exhibits-D1 to D3 are the credit bills. Thus, it is evident that there was business dealings between the complainant and accused No.1 Company regarding supply of silk waste materials. Exhibit-D6 is the counterfoils of cheque leaves. There is a mention about the issuance of three cheques bearing Nos.585268 to 585270 in favour of K.G.Khetan for Rs.2,00,000/-each. The said cheques were issued on 16.09.1999, but according to the complainant he had advanced the loan in the year 2004. Exhibit-D6 is the counterfoils of cheque leaves. There is a mention about the issuance of three cheques bearing Nos.585268 to 585270 in favour of K.G.Khetan for Rs.2,00,000/-each. The said cheques were issued on 16.09.1999, but according to the complainant he had advanced the loan in the year 2004. Exhibit-D8 is the letter written by accused No.2 – Managing Director of accused No.1 Company requesting the complainant to return three cheques bearing Nos.585268 to 585270 and also informing about the payments done by him to the complainant through other cheques drawn on Bank of India for a total sum of Rs.10,08,200/-. But, there is no reply by the complainant to this letter dated 15.07.2000 (ExhibitD8). If at all there was a separate loan transaction, the complainant would have immediately responded to Exhibit-D8 – letter, but no such efforts have been done. 19. On reappreciation of evidence, the first appellate court after considering entire evidence, has rightly come to the conclusion that the appellant has failed to establish that the accused had issued three cheques towards payment of legally payable debt and the conclusion drawn by the trial court is not legal. On reappreciation of evidence, this Court is satisfied that the accused had raised probable defense and the findings of the first appellate court are proper and justified. 20. For the foregoing reasons, the judgment and order of conviction passed by the trial Court is unsustainable. There are no valid grounds to interfere with the order of the first appellate court. Accordingly, I pass the following: ORDER The Criminal Appeal is dismissed. The judgment of acquittal rendered by the first appellate court in Crl.A. No.117/2008 is confirmed.