138 NI Act | Advancing ₹10 Lakhs in Cash Without Purpose or Proof Renders Case Wobbly Even Before Presumption is Raised: Madras High Court

Madras High Court upheld the acquittal of a woman accused under Section 138 of the Negotiable Instruments Act, emphasizing that the complainant’s failure to prove the financial capacity and the very transaction underlying the dishonoured cheque made his case “wobbly” even before statutory presumptions could apply.

Justice D. Bharatha Chakravarthy, while dismissing the appeal filed by the complainant against the trial court’s acquittal, ruled that the accused had successfully rebutted the presumption under the NI Act by establishing a probable defence—that the cheque was issued not for a debt, but as security for a transaction involving her husband. The High Court found no perversity in the findings of the trial court and confirmed the acquittal.

“Even Before the Presumption is Raised, the Complainant’s Case is Wobbly”: Court Faults Absence of Loan Purpose, Financial Proof

The appeal arose from a criminal complaint filed under Section 200 CrPC alleging an offence under Section 138 of the Negotiable Instruments Act, 1881. The petitioner, P.S. Deivaraj, claimed to have lent a cash sum of ₹10 lakhs to the respondent, M. Jaya, on 2nd August 2016, at his residence. According to him, the loan carried an interest of 18% per annum and was to be repaid within eight months. A cheque dated 19th April 2017 for ₹10 lakhs was said to have been issued by the accused in discharge of this liability.

However, the cheque was dishonoured due to “Funds Insufficient”, and despite a statutory demand notice, no payment was made. The complainant claimed that the accused had paid interest until February 2017, which supported the existence of the loan transaction.

The trial court, however, acquitted the accused, noting a complete absence of supporting documentation, no clarity on the purpose of the loan, and the failure of the complainant to even explain how he knew the accused or why the loan was extended.

Presumption under NI Act, Financial Capacity, and Probable Defence

At the heart of the case lay the statutory presumption under Section 139 of the Negotiable Instruments Act, which presumes that the holder of a cheque received it for the discharge of a legally enforceable debt or liability. However, the High Court observed that this presumption is rebuttable and can be displaced by the accused through evidence establishing a probable defence on a preponderance of probabilities.

The complainant, a self-professed financier, claimed he lent ₹10 lakhs in cash to the accused, also a person engaged in finance. Yet, he neither explained the need for the loan nor produced documentation such as income tax returns, books of account, or any loan agreement.

Justice D. Bharatha Chakravarthy observed:

“Even before the presumption is raised, I am of the view that the complainant’s case is wobbly in respect of discharging his initial burden as to the advancement of loan and the issue of the cheque.

Cheque Executed in Different Ink—Supports Defence That It Was Issued Blank as Security

The Court also gave weight to the manner of execution of the cheque. It noted that the signature and the rest of the cheque entries were written in different inks, and the complainant failed to depose that the cheque was filled by the accused in his presence.

This lent credence to the defence argument that the cheque was issued blank and was not related to any independent debt of the accused. The accused had argued that the cheque was likely given by her to her husband, who had dealings with the complainant, and that the complainant had misused the same in order to recover alleged dues from her husband’s separate financial dealings.

The accused examined herself as DW2 and also examined another witness as DW1. She placed on record documents related to connected insolvency proceedings, prior exchanges of notices, and other cheques and cases involving the complainant. These collectively satisfied the court that:

“The accused has rebutted the presumption to the level of preponderance of probability that the cheque could have been issued as security with reference to the transactions between her husband and the complainant.

Appeal Against Acquittal—No Perversity in Trial Court’s Reasoning, Says High Court

The Court reiterated the principle that interference in an appeal against acquittal is warranted only where the trial court’s view is perverse or implausible. In this case, it found that the trial court had evaluated the evidence properly, noted the lack of foundational proof from the complainant, and gave appropriate benefit of doubt to the accused.

It observed:

“Once the accused has rebutted the presumption, in the absence of any further proof from the complainant with reference to the advancement of loan of ₹10,00,000/-, the finding of the trial Court that the benefit of doubt should be given to the accused and that she should be acquitted of the offence cannot be said to be perverse or implausible so as to upturn in an appeal against acquittal.”

Accordingly, the Court dismissed the appeal, confirming the respondent's acquittal.

Date of Decision: 13.11.2025