138 NI Act | Accused Cannot Rebut Presumption Of Legally Enforceable Debt At Pre-Trial Stage In Cheque Bounce Cases: Supreme Court

"At the stage of issuance of process, the statutory presumption under Section 139 of the N.I. Act cannot be dislodged in a summary manner merely by contending that the cheque issued was not for any legally enforceable debt or liability," Supreme Court, in a significant ruling dated April 7, 2026, held that the statutory presumption of a legally enforceable debt in cheque bounce cases cannot be summarily dislodged by the accused at the pre-trial stage of issuing process.

A bench comprising Justice J.K. Maheshwari and Justice Atul S. Chandurkar observed that dismissing a complaint under Section 138 of the Negotiable Instruments Act without a trial defeats the legislative intent and amounts to ignoring the statutory presumption established under Section 139 of the Act.

The appellant received a cheque of ₹50 crores from a mediator acting as a guarantor during an amicable settlement of matrimonial and corporate disputes with her husband. When the cheque was dishonoured with the remark "payment stopped by drawer", the Metropolitan Magistrate issued process against the mediator under Section 138 of the Negotiable Instruments Act. However, the Sessions Court quashed the process, holding that the cheque was not issued towards a legally enforceable debt since the mediator had not signed the underlying settlement agreement, a decision which was later upheld by the Bombay High Court.

The primary question before the court was whether a magistrate's order issuing process under Section 138 of the Negotiable Instruments Act can be quashed on the ground that the cheque was not issued for a legally enforceable debt. The court also had to determine if the statutory presumption under Section 139 of the Act can be rebutted by the accused summarily at the pre-trial stage.

Only Basic Ingredients Required At Pre-Trial Stage

The Supreme Court observed that when a magistrate considers issuing process, the assessment is strictly limited to whether the foundational elements of the offence are prima facie satisfied. The bench clarified that these elements include the issuance of the cheque, its dishonour upon presentation, the issuance of a statutory notice, and the filing of the complaint within the prescribed period. The court emphasized that the magistrate need not conduct a mini-trial on the enforceability of the debt at this nascent stage.

Activation Of Statutory Presumption Under Section 139

Addressing the burden of proof, the court underscored that once the drawer admits to issuing the cheque and does not deny their signature, a mandatory statutory presumption comes into play. The bench noted that Section 139 of the Negotiable Instruments Act requires the court to presume that the cheque was issued for a legally enforceable debt or liability. This presumption shifts the evidentiary burden entirely onto the drawer to prove otherwise.

"If the drawer does not dispute issuance of such a cheque nor does he deny his signature on the dishonoured cheque, the statutory presumption as contemplated under Section 139 of the N.I. Act comes into play."

Rebuttal Of Presumption Only Permissible During Trial

The bench held that the Sessions Court fundamentally erred by assessing the enforceability of the debt based merely on the fact that the mediator had not signed the settlement agreement. The Supreme Court ruled that any defence regarding the absence of a legally enforceable debt must be raised and proved during the trial by leading evidence. The court firmly stated that allowing an accused to dislodge this presumption in a summary manner at the pre-trial stage washes away the statutory protection granted to the payee.

Reliance On Binding Precedents

Reinforcing its stance, the court extensively cited its landmark precedents in Rangappa v. Sri Mohan and Rajesh Jain v. Ajay Singh. The bench highlighted that Section 139 is a "reverse onus clause" enacted to improve the credibility of negotiable instruments. Drawing from Rajesh Jain, the court reiterated that until the evidential burden is discharged by the accused at trial, the presumed fact regarding the existence of the debt must be taken as true without expecting the complainant to do anything further.

"Coming to a conclusion that the cheque was not issued for a legally enforceable debt at the pre-trial stage itself without granting an opportunity to the complainant to substantiate her case by leading evidence would amount to ignoring the statutory presumption..."

Disputed Questions Of Fact Demand A Full Trial

The court distinguished the application of its earlier ruling in Sunil Todi v. State of Gujarat, noting that even in that decision, disputed questions regarding the existence of an outstanding liability were held to be questions of fact requiring determination at trial. The bench concluded that the lower courts misdirected themselves by giving undue weight to the unsigned settlement agreement while completely ignoring the satisfied ingredients of Section 138.

The Supreme Court allowed the criminal appeal and set aside the orders of the Bombay High Court and the Sessions Court. The original cheque bounce complaint filed by the appellant was restored to the file of the Metropolitan Magistrate for fresh adjudication on its own merits in accordance with the law.

Date of Decision: 07 April 2026