Dishonour Of Cheque | Accused Can Rebut Statutory Presumptions Under Sec 139 NI Act By Establishing Probable Defence Through Preponderance Of Probabilities: Madras High Court

"The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed," Madras High Court.

Madras High Court, in a judgment dated 16 September 2026, affirmed that an accused person facing prosecution under Section 138 of the Negotiable Instruments Act, 1881, is not required to prove their defence beyond a reasonable doubt, but merely needs to establish a probable defence based on the preponderance of probabilities to rebut the statutory presumptions under Sections 118 and 139 of the Act.

A single judge bench of Justice G. Arul Murugan observed that while the initial burden on the complainant is discharged upon the admission of the signature on the cheque, the onus shifts to the accused to bring on record facts and circumstances that render the complainant's case doubtful.

Trial Court Findings Upheld

The matter reached the High Court by way of a criminal appeal filed by the complainant, challenging the acquittal of the respondent by the Metropolitan Magistrate in 2021. The dispute arose from a dishonoured cheque for Rs. 3,50,000, which the complainant alleged was issued to discharge a hand loan. The trial court had concluded that the complainant failed to prove that the instrument was supported by legally enforceable consideration, noting that the accused had successfully rebutted the presumption by raising a probable defence during cross-examination.

Scope of Probable Defence

The primary legal issue before the High Court was whether the respondent had successfully rebutted the statutory presumption regarding the existence of a debt or liability. The court examined whether the appellant's admitted practice of securing multiple instruments—including cheques, promissory notes, and property documents—from the respondent, the respondent's sister, and the respondent's brother-in-law for a single transaction effectively undermined the claim that the specific cheque in question was supported by valid, independent consideration.

Court Reaffirms Reverse Onus Principles

The High Court observed that Section 139 of the NI Act is an example of a "reverse onus" clause. Citing Supreme Court precedents including Bharat Barrel and Drum Manufacturing Company vs. Amin Chand Payrelal and Kumar Exports vs. Sharma Carpets, the court reiterated that the accused is not expected to discharge an unduly high standard of proof. The court noted that it is sufficient if the accused brings on record evidence, or highlights contradictions in the complainant's own case, that makes the non-existence of the debt so probable that a prudent man would act upon the plea that no debt existed.

Evidence of Single Transaction and Lack of Consideration

The bench found that the complainant’s own evidence proved fatal to his case. During testimony, the complainant admitted he was not a money lender but had advanced funds to the respondent while simultaneously securing cheques and promissory notes from the respondent's relatives for the same amount. The complainant failed to offer a cogent explanation as to why separate complaints were filed against different parties for the same transaction. The court highlighted that such conduct, when coupled with the lack of details regarding the interest component mentioned in the promissory note but omitted from the legal notice, severely damaged the credibility of the transaction.

Court Emphasizes Duty to Appreciate Totality of Evidence

The court stressed that in proceedings under Section 138 of the NI Act, while the complainant need not initially prove financial capacity, the accused has an absolute right to demonstrate through cross-examination or independent material that the complainant lacked the capacity or that the transaction itself was not as claimed. Ultimately, it is the duty of the court to consider the totality of the evidence and determine whether the complainant's case has been put in peril by the probable defence raised by the accused.

"The accused may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant."

The High Court found no illegality or perversity in the trial court’s judgment, noting that the appellant had miserably failed to establish that consideration had actually passed through the subject cheque. Consequently, the criminal appeal was dismissed, upholding the acquittal of the respondent. The ruling serves as a vital reminder to practitioners that the statutory presumption under the NI Act is not absolute and can be effectively countered by exposing inconsistencies in the complainant’s factual narrative regarding the nature and existence of the alleged debt.

Date of Decision: 16 September 2026