Complainant’s Failure To Provide Specific Loan Details & Evidence Of Parties' Involvement In Ponzi Scheme Rebuts Section 139 NI Act Presumption: Calcutta High Court

"If the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail," High Court at Calcutta, in a judgment dated May 18, 2026, held that an order of acquittal in a cheque dishonour case is justified when the complainant fails to substantiate the particulars of the alleged loan and the accused demonstrates a probable defense.

A single-judge bench of Justice Chaitali Chatterjee Das observed that the presumption under Section 139 of the Negotiable Instruments Act is not absolute and can be rebutted through the preponderance of probabilities. The Court emphasized that when both parties are involved in business schemes like Ponzi arrangements, the probability of cheques being issued for business purposes rather than personal loans must be considered.

The appellant, Anup Agarwala, filed a criminal appeal against a 2013 judgment of acquittal passed by the Judicial Magistrate, Tehatta. The complainant alleged that he had advanced a friendly loan of Rs. 3,00,000 to the respondent for personal necessity, in exchange for which two cheques were issued in June 2012. Both cheques were dishonoured due to "insufficient funds." The Trial Court acquitted the accused, noting contradictions in witness testimonies and the fact that both parties were involved in a Ponzi scheme named "TVI Express," leading the court to doubt the existence of a legally enforceable debt.

The primary question before the court was whether the complainant successfully proved the existence of a legally enforceable debt under Section 138 of the NI Act. The court also examined whether the accused had successfully rebutted the statutory presumption under Section 139 of the Act by showing that the cheques were not issued in discharge of a loan. Finally, the court considered whether the non-service of the demand notice, returned with the endorsement "7 days absent," affected the maintainability of the complaint.

Standard Of Proof For Rebutting Statutory Presumptions

The Court noted that while Section 139 of the NI Act creates a presumption in favour of the holder of the cheque, this is a "reverse onus clause" intended to improve the credibility of negotiable instruments. However, the bench clarified that the accused is not required to meet an unduly high standard of proof to rebut this presumption.

"The standard of proof for doing so is that of 'preponderance of probabilities'. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail."

Absence Of Specific Loan Details Creates Reasonable Doubt

The bench observed that the complainant failed to provide critical details regarding the transaction, such as the exact date, time, or month when the loan was purportedly advanced. Furthermore, the Court found it suspicious that the complainant showed extreme "hurriedness" by depositing the cheques the very next day after they were allegedly issued, without any written agreement or security.

Court Highlights Lack Of Substantiation For Alleged Loan

The Court highlighted that the complainant's witness (P.W. 2) contradicted himself during cross-examination, initially claiming the money was given in his presence but later denying any knowledge of the transaction. The bench noted that without a business transaction record or an agreement, a loan of such a significant amount based purely on oral testimony, which itself was inconsistent, could not be sustained.

"In absence of any agreement and when the complainant failed to substantiate the date time or month when he gave such loan coupled with the hurriedness shown in presenting the cheque certainly creates a doubt in the mind of the court."

Involvement In Ponzi Scheme As A Valid Defence

The Court took significant note of the fact that both the appellant and the respondent were associated with a Ponzi scheme known as TVI Express. The respondent argued that the cheques were issued for business purposes within this scheme two years prior and were later misused by the complainant after the business collapsed.

Probability Of Business Transaction Over Personal Loan

The bench found substance in the Trial Court’s view that the parties' engagement in a Ponzi scheme raised a strong probability that the cheques were issued for business purposes rather than a personal loan. The Court held that this factual matrix, combined with the lack of loan details, was sufficient to rebut the statutory presumption under Section 139 of the NI Act.

Service Of Notice And Presumption Under General Clauses Act

Regarding the demand notice, the Court observed that the postal endorsement "7 days absent" does not automatically qualify as "deemed service" if the accused can prove a valid reason for his absence. The respondent produced evidence that he was away tending to his ailing mother, and the complainant made no further attempt to serve the notice.

Presumption Of Service Is Rebuttable

Citing Section 27 of the General Clauses Act, the Court held that the presumption of service is rebuttable. Since the respondent established his absence and the complainant failed to examine any postal authority to prove deliberate avoidance, the statutory requirement for notice was not conclusively met in this specific factual context.

The High Court concluded that the complainant failed to prove that the cheques were drawn for the discharge of a legally enforceable debt. The bench affirmed the Trial Court's judgment, stating that once a probable defense is raised, the burden shifts back to the complainant, who in this case failed to discharge it. Consequently, the criminal appeal was dismissed, and the order of acquittal was upheld.

Date of Decision: 18 May 2026