Complainant's Financial Capacity Irrelevant If Accused Fails To Rebut Statutory Presumption Under Section 139 NI Act: Delhi High Court

"Rest of the contentions qua the source of funds and financial capacity of the respondent no.2, his books of accounts, transaction records or income tax returns... pale into insignificance, particularly taking into account the non-discharge of the onus upon the petitioner under Section 139 NI Act." Delhi High Court, in a significant ruling, held that once the essential ingredients of an offence under Section 138 of the Negotiable Instruments Act are established, questions regarding the complainant's financial capacity or source of funds become completely insignificant if the accused fails to discharge the statutory onus.

A bench of Justice Saurabh Banerjee observed that mere bald denials and unsubstantiated claims are insufficient to dislodge the legal presumptions operating in favour of the cheque holder.

The petitioner challenged a trial court judgment convicting him under Section 138 of the NI Act and sentencing him to three months of simple imprisonment along with a fine of Rs. 3,50,000. The complainant alleged that the petitioner issued a cheque for repayment of a loan comprising cash and cheque components, which was dishonoured due to account closure. The appellate court upheld the conviction, prompting the present revision petition before the High Court.

The primary question before the court was whether the accused could challenge the financial capacity and source of funds of the complainant without first discharging the reverse burden of proof under Section 139 of the NI Act. The court was also called upon to determine if the revisional jurisdiction under Section 397 of the CrPC warranted interference with the concurrent findings of the lower courts.

Essential Ingredients Of Section 138 NI Act

The court began by explaining that Section 138 of the NI Act acts as a self-contained code requiring specific criteria to be met for an offence to be established. These include the drawing of a cheque for the discharge of a debt, presentation within the validity period, dishonour due to insufficient funds or closed accounts, issuance of a legal notice, and subsequent failure to repay within 15 days.

Statutory Presumptions Must Be Rebutted

Justice Banerjee emphasised that once these essential ingredients are fulfilled, a legal presumption operates in favour of the complainant under Sections 118 and 139 of the NI Act. The court noted that it becomes incumbent upon the accused to prove otherwise and rebut this legal presumption with cogent evidence. The same has been repeatedly held to be the correct position of law across various judicial pronouncements.

Bald Denials Are Insufficient

Addressing the petitioner's defence that he had only taken a partial loan and returned it, or that the cheque was a blank security document, the court found an absolute lack of supporting evidence. The bench observed that the petitioner failed to produce any transaction records, cash receipts, or proof of police complaints regarding the alleged misuse of the blank cheque given as security.

"Aside from bald denials/ bare statements/ unsubstantiated claims regarding the actual loan amount being Rs.50,000/- which the petitioner claimed to have returned with interest or that he issued a blank cheque as security, this Court does not find even a shred of evidence or substantiation thereto."

Financial Capacity Irrelevant Upon Non-Discharge Of Onus

The court thoroughly rejected the petitioner's arguments questioning the source of funds, financial capacity, and absence of income tax returns of the complainant. Relying on the Supreme Court precedent in Rohitbhai Jivanlal Patel vs. State of Gujarat, the court clarified that such contentions cannot rescue an accused who has completely failed to discharge their own statutory burden.

Revisional Jurisdiction Extremely Limited

The High Court further noted that its ambit of interference in the exercise of revisional powers is extremely limited. Citing Supreme Court and High Court precedents, the bench stated that such powers cannot be invoked simply to substitute the well-reasoned views taken by the trial court and the appellate court unless there is patent perversity in the findings.

Finding no illegality, perversity, or infirmity in the impugned orders, the High Court dismissed the revision petition and upheld the conviction. The petitioner was directed to be taken into judicial custody to serve the remainder of his three-month sentence and to pay the mandated fine to the complainant.

Date of Decision: 22 July 2026