138 NI Act | Cheque Alone Does Not Prove Liability – Complainant Failed To Establish Loan Transaction, Date, or Source of Funds: Gujarat High Affirms Acquittal

"Presumption Under Section 139 NI Act Is Rebuttable — Financial Capacity Must Be Proved When Challenged ……Once the accused raises a probable defence, the burden shifts to the complainant to prove the existence of a legally enforceable debt. The presumption under Section 139 of the NI Act disappears once rebutted by preponderance of probabilities,” held the Gujarat High Court while affirming the acquittal of an accused in a cheque bounce case involving ₹2,00,000/-.

In a significant judgment Justice S.V. Pinto of the Gujarat High Court dismissed an appeal filed by the complainant challenging the acquittal of the accused under Section 138 of the Negotiable Instruments Act, 1881, and reaffirmed the core evidentiary principle that presumptions under the NI Act do not absolve the complainant from proving foundational facts when financial capacity is put in issue.

"Cheque Alone Does Not Prove Liability – Complainant Failed To Establish Loan Transaction, Date, or Source of Funds"

The appeal arose from a cheque dishonour case where the complainant alleged that the accused borrowed ₹2,00,000/- for business expansion in 2004 and later issued two cheques for ₹1,00,000/- each, which bounced due to insufficient funds. While the trial court acquitted the accused in Criminal Case No. 3367 of 2005, the complainant challenged the verdict on the ground that once the cheque was admitted, the statutory presumption under Section 139 must apply, and no further proof of liability was required.

Rejecting the appeal, the High Court held:

“The complainant has failed to even specify the date of the loan transaction, nor has he produced any document, diary entry, or name of a lender from whom funds were allegedly borrowed. When financial capacity is specifically challenged, bare assertion is not sufficient to sustain conviction.”

The Court noted that the complainant was a school teacher with a monthly income of ₹3,000/-, had a family with dependent children, and no documentary evidence was furnished to demonstrate ability to advance ₹2,00,000/-, whether through bank withdrawal or third-party lending.

"Defence That Cheques Were Misused From Old Chequebook Was Consistent — Burden Shifted Back to Complainant"

The accused admitted issuing the cheques but claimed they were handed over to his brother-in-law Vinodbhai in 2000 during business dealings and were misused by the complainant. The defence, though not substantiated by a complaint against the brother-in-law, was consistently maintained from the reply to statutory notice onward.

“The presumption under Section 139 is rebuttable by raising a probable defence, not by proving innocence beyond reasonable doubt,” the Court emphasized, citing Rajesh Jain v. Ajay Singh (2023 AIJEL SC 72588) and Basalingappa v. Mudibasappa (2019 AIJEL SC 63955). It reiterated that the standard is preponderance of probabilities, not proof beyond reasonable doubt.

The Court found that:

“Even if the accused did not file a complaint about cheque misuse, his explanation was coherent, consistent and not implausible. In such circumstances, the statutory presumption is rebutted, and the burden reverts to the complainant, who in this case failed to discharge it.”

"Financial Capacity Must Be Proved Once Questioned — Section 139 Does Not Override Foundational Evidence Requirement"

The High Court also relied on Dattatraya v. Sharanappa (2024) 8 SCC 573, where the Supreme Court held that:

“Where concern of financial capacity of the creditor is raised, the same is to be discharged by the complainant through cogent evidence.”

In this case, the complainant’s assertion that he borrowed from "friends" was not backed by even a single name, no bank withdrawal record, no promissory note, and no independent witness to the alleged cash transaction. The Court held this failure to meet the evidentiary threshold was fatal to the prosecution.

"Trial Court’s Acquittal Not Perverse — High Court Should Not Interfere When Two Plausible Views Exist"

Reiterating the appellate principles under Section 378 CrPC, the High Court held that appellate interference in an acquittal is warranted only when the lower court’s view is perverse or unsupported by evidence. Citing Kumar Exports v. Sharma Carpets (2009) 2 SCC 513, the Court stated:

“The trial court’s finding that the complainant failed to establish the existence of a debt or liability is not perverse. It is based on appreciation of evidence and is a plausible view, hence, this Court finds no justification to interfere.”

The Court further observed:

“The cheques alone do not prove the liability. Once a probable defence is established by the accused, the complainant must bring in substantive evidence. In this case, no such evidence exists.”

No Reason to Interfere with Acquittal — Appeal Dismissed, Bail Bond Cancelled

Justice S.V. Pinto concluded:

“This Court finds no reason to interfere with the impugned judgment and order and the present appeal is devoid of merits. Resultantly, the same is dismissed. The judgment of acquittal is hereby confirmed. Bail bond stands cancelled.”

The judgment reaffirms the critical evidentiary requirement in cheque dishonour cases: statutory presumptions under the NI Act are helpful but not conclusive, and once the accused rebuts them by raising a plausible narrative, the onus decisively shifts back to the complainant to prove his case with credible and convincing evidence.

Date of Decision: 04 November 2025