Section 106 constitutes an exception to Section 101 of The Indian Evidence Act, 1872. Shambu Nath Mehra v. State of Ajmer, (1956) 1 SCR 199 has stood the test of time. Thus, Section 106 will apply to those cases where prosecution has succeeded in establishing facts from which a reasonable inference can be drawn regarding existence of certain other facts which are within special knowledge of accused. When accused fails to offer proper explanation about existence of said other facts, Court can always draw an appropriate inference. When a case is resting on circumstantial evidence, if accused fails to offer a reasonable explanation in discharge of burden placed on him by virtue of Section 106, such a failure may provide an additional link to chain of circumstances.

In a case governed by circumstantial evidence, if chain of circumstances which is required to be established by prosecution is not established, failure of accused to discharge the burden under Section 106 is not relevant at all.

The entire case is based on circumstantial evidence. Sharad Birdhichand Sarda v. State of Maharashtra, (1984) 4 SCC 116 is a leading decision of this Court on the subject. The facts established do not rule out existence of any other hypothesis. The facts established cannot be said to be consistent only with one hypothesis of guilt of Nagendra.  

– Hon’ble Justice Abhay S. Oka, Nagendra Sah v. State of Bihar, [Criminal Appeal No. 1903 of 2019].