138 NI Act | Double Presumption of Innocence Shields Accused Where Complainant Fails to Establish Legally Enforceable Debt: Kerala High Court in Cheque Dishonour Case

“The complainant has not succeeded in proving the offence under Section 138 of the N.I. Act against the accused… the view taken by the trial court is a possible view” – Kerala High Court delivered a decisive ruling in a cheque dishonour appeal, affirming the trial court’s acquittal of the accused under Section 138 of the Negotiable Instruments Act, 1881. The single-judge bench of Justice Johnson John held that the complainant failed to prove the existence of a legally enforceable debt, and that the accused had successfully rebutted the statutory presumptions under Sections 118 and 139 of the Act.

The judgment emphasized the need for credible and consistent evidence to invoke penal consequences under the NI Act and applied the doctrine of double presumption of innocence in favour of the acquitted accused.

“Presumption Under Section 139 Is Not Ironclad — Accused Can Rebut It By Probable Defence”: Court Applies Basalingappa Principle to Sustain Acquittal

The central allegation in the complaint was that the accused, K. Gopakumar, had issued a cheque dated 10.04.2009 for ₹3,20,000 in discharge of a debt. When the cheque was dishonoured due to insufficient funds, a statutory notice was issued, and upon non-payment, prosecution was initiated under Section 138 of the NI Act.

However, the trial court found that the complainant, Aravindakshan T., had not been able to prove the existence of a debt or liability and therefore acquitted the accused. This was challenged before the High Court, where the complainant’s counsel argued that since the accused had not denied his signature on the cheque, and no reply was given to the statutory notice, the court ought to have drawn the presumption under Sections 118 and 139 in his favour.

But the High Court rejected this argument, pointing out glaring inconsistencies and omissions in the complainant’s own case.

Justice Johnson John observed:

“The complainant has not disclosed the nature of the transaction or the date of execution and issuance of the cheque in the complaint or statutory notice. The evidence of PW1 in cross examination would show that his evidence in chief examination… is not at all reliable.”

The Court underlined that merely admitting the signature on the cheque does not automatically result in conviction unless the existence of a legally enforceable debt or liability is convincingly established.

Inconsistent Testimony, Absence of Documentary Proof and Third-Party Interference Weakened Complainant’s Case

The High Court scrutinised the complainant’s testimony and found serious contradictions. In the chief affidavit, the complainant stated that the loan was requested in the first week of March 2009 and disbursed on 04.03.2009. However, in cross-examination, he gave varying dates — 24th, 25th February and even 2nd March. He also failed to mention in his complaint or notice the time and place of the alleged loan transaction.

Further, no documents were produced to support the alleged lending of ₹3.2 lakhs, and the complainant could not substantiate the source of funds, stating vaguely that the amount came from joint family property.

The Court also noted with significance that one Kodi Sreedharan, allegedly present during the transaction, was later revealed to be a political figure who, according to the accused, had threatened him and forcibly obtained a blank cheque to settle a financial dispute between the accused and the complainant’s brother.

The accused, in his Section 313 CrPC statement, categorically denied any transaction with the complainant and maintained that the cheque was misused after being obtained through coercion. The Court observed:

“The specific case of the accused is that there was a financial dispute between Ravi, the brother of the complainant, and the accused… and subsequently, one Kodi Sreedharan threatened him and obtained a blank signed cheque.”

“The Standard of Proof for the Accused is Not Beyond Reasonable Doubt — Only Preponderance of Probabilities”: Kerala High Court Reiterates NI Act Principle

Relying on Basalingappa v. Mudibasappa (2019) 5 SCC 418, ANSS Rajashekar v. Augustus Jeba Ananth, and APS Forex v. Shakti International, the Court reiterated the principle that the presumption under Section 139 is rebuttable, and that the accused is not required to prove his defence beyond reasonable doubt.

Justice Johnson John held:

“It is well settled that the standard of proof which is required from the accused to rebut the statutory presumption under Sections 118 and 139 of the N.I Act is preponderance of probabilities… and the accused is not required to prove his case beyond reasonable doubt.”

The Court found that the accused had succeeded in raising a probable defence by showing the lack of documentation, contradictions in testimony, and possible coercion. In light of this, the statutory presumptions stood rebutted.

“In Case of Acquittal, There Is a Double Presumption in Favour of the Accused”: High Court Declines to Interfere in Criminal Appeal

Turning to the scope of appellate review, the Court invoked the celebrated decision in Chandrappa v. State of Karnataka (2007) 4 SCC 415, and emphasized that interference in acquittal is not warranted unless the view taken by the trial court is manifestly illegal or perverse.

Quoting directly:

“If two reasonable conclusions are possible on the basis of the evidence on record, the appellate court should not disturb the finding of acquittal recorded by the trial court.”

The Court concluded:

“On a careful re-appreciation of the entire evidence, I find that the view taken by the trial court is a possible view… the complainant has not succeeded in proving the offence under Section 138… Therefore, I find that this appeal is liable to be dismissed.”

Accordingly, the appeal was dismissed, and the acquittal of the accused was confirmed.

This decision reinforces that prosecution under Section 138 of the NI Act is not automatic upon cheque dishonour — the burden remains on the complainant to prove a legally enforceable debt, and any presumption in his favour is subject to rebuttal. Courts will closely examine internal contradictions, lack of documentary proof, and the credibility of the transaction, even if the accused admits to signing the cheque.

The judgment also serves as a reminder that appellate courts must be cautious in disturbing orders of acquittal, particularly where the trial court’s findings are grounded in a reasonable appreciation of evidence.

Date of Decision: 24 October 2025