138 NI | Signature does not equal liability, Not Every Signature Means Debt: Kerala High Court Confirms Acquittal

“Signature Alone Does Not Create Liability”,  Kerala High Court delivered a decisive ruling , affirming the acquittal of an accused in a cheque dishonour case under Section 138 of the Negotiable Instruments Act, 1881, and holding that mere admission of signature on the cheque does not automatically establish a legally enforceable debt. Justice Johnson John, exercising criminal appellate jurisdiction, upheld the Sessions Court judgment which reversed the original conviction imposed by the Magistrate.

At the very outset, the Court underscored a central legal principle:
“Once a probable defence is raised which casts doubt on the existence of a legally enforceable debt, the burden shifts back to the complainant — and if he fails to discharge it, the prosecution must fail.”

The complainant had appealed against the acquittal granted by the V Additional Sessions Judge, Ernakulam, claiming that the accused issued a cheque dated 15.07.2009 for ₹4,00,000 towards discharge of a loan, which was dishonoured due to insufficient funds. While the trial court convicted the accused, the Sessions Court found that she had successfully rebutted the presumption arising under Sections 118 and 139 of the NI Act. The High Court agreed.

“Cheque Was a Security and Was Misused”: Defence Story Acceptable as Probable

The accused acknowledged the signature but asserted that the cheque had not been issued to the complainant. Instead, she maintained that her husband had entrusted the cheque to one Robert as security for a loan, which was later repaid, but the cheque was never returned and was allegedly misused to initiate a false prosecution.

Crucially, the complainant, during cross-examination, failed to deny the defence suggestion that the cheque came from Robert. Instead, he stated, “I have no connection with Robert for the past few days” and “I am not aware about the transaction between them.” The Court found these evasive answers harmful to his 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. His evidence is neither reliable nor convincing.”

“Financial Capacity Must Be Proved When Challenged”: Complainant’s Version Collapses

The complainant claimed he advanced the loan in cash, sourced from the sale of four cents of property. However, he produced no document or witness to support either the sale or the transaction. Exhibit P6, relied upon to show withdrawal of ₹3,85,000 from a Co‑operative Society, instead revealed that the amount was deposited only the previous day—contradicting his own story of having the funds ready.

The Court noted: “Contradictions regarding the source of funds and the absence of documentary corroboration severely undermine the complainant’s version.”

Adding to the doubt was the complainant’s admission that he had seen the accused only once ten years earlier. The Court remarked that the absence of any prior relationship weighs heavily against the plausibility of advancing a ₹4 lakh cash loan.

“Presumption Under Section 139 Is Rebuttable, Not Absolute”

Relying on binding precedents including Basalingappa v. Mudibasappa and M.S. Narayana Menon v. State of Kerala, the High Court reiterated that the accused only needs to show a probable defence, not prove innocence beyond reasonable doubt. Circumstantial inconsistencies in the complainant’s testimony were held sufficient to shift the burden back.

Justice Johnson John emphasised: “Statutory presumptions are tools for justice, not substitutes for truth. Where the accused shows a reasonable possibility that no debt existed, the prosecution must fail.”

“Double Presumption of Innocence in Acquittal Appeals”: No Grounds for Interference

Referring to Chandrappa v. State of Karnataka, the Court observed that interference with an acquittal requires compelling reasons. Here, the Sessions Court had adopted a legally plausible interpretation of evidence.

The Court concluded in categorical terms: “I find that the view taken in the impugned judgment is a possible view. The accused has succeeded in rebutting the statutory presumptions and the complainant has not succeeded in proving the offence under Section 138.”

With that declaration, the appeal was dismissed and the acquittal confirmed.

The judgment reinforces a critical dimension of cheque bounce prosecutions: Section 138 is not intended to be a weapon for coercion or misuse, and a cheque, even if signed, does not create liability without proof of debt. Where a defence of misuse is credible and the complainant’s case is weak, conviction cannot stand.

“Signature does not equal liability. The law demands proof, not presumption.”

Date of Decision: 17 November 2025