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by Admin
07 April 2026 6:31 PM
“Mere Issuance of Cheque Does Not Prove Legally Enforceable Debt …..The accused has succeeded in rebutting the presumption regarding consideration… and I find no reason to interfere with the finding of the trial court” – Kerala High Court
In a significant reaffirmation of the legal standard for cheque dishonour cases, the Kerala High Court holding that the complainant’s failure to establish the source of funds and the actual lending transaction was sufficient to rebut the presumption of liability under Section 139 of the Negotiable Instruments Act, 1881.
Justice Johnson John, speaking for the Court, noted that although the complainant had relied on the presumption under the NI Act, the defence raised by the accused was probable and substantiated, especially through the evidence of DW1 and Exhibit D1, which cast serious doubts on the complainant’s version of the financial transaction. The Court held that mere issuance of a cheque, even if the signature is admitted, does not by itself establish a legally enforceable debt if the presumption stands rebutted by credible defence.
“Acquitted Accused Enjoys Double Presumption of Innocence – Interference Not Justified When Trial Court’s View is Plausible”
The case arose from a complaint by Thangam, who alleged that Haridasan, a friend, had borrowed ₹50,000 on 06.05.2006 and had issued a cheque dated 09.08.2006 towards repayment. When the cheque bounced due to insufficient funds, proceedings were initiated under Section 138 of the NI Act.
The trial court, however, acquitted the accused, holding that the accused had successfully rebutted the presumption under Sections 118 and 139, and that the complainant had failed to prove the transaction. This led to the present appeal before the High Court.
While the appellant’s counsel argued that the accused had not denied the signature and had failed to respond to the statutory notice, the Court observed that neither admission of signature nor silence in reply is conclusive when the complainant’s own evidence lacks credibility.
Justice Johnson John noted:
“The evidence of DW1, Manilal, and Exhibit D1, certified copy of the exchange deed, clearly shows that there was no financial transaction between the parties in connection with the execution of the said deed… Therefore, the accused has succeeded in rebutting the presumption regarding consideration.”
The Court found that the complainant had claimed to have used proceeds from a property transaction to advance the loan. However, DW1 (the buyer of that property) testified that no consideration was paid, and the deed marked as Exhibit D1 supported that testimony. Furthermore, the complainant admitted in cross-examination to having availed two loans totalling ₹90,000 for personal needs from different cooperative banks, which undermined her claim of financial capacity to lend ₹50,000 to the accused.
“Accused Can Rely on Circumstantial Evidence to Rebut Presumption – Burden is Evidentiary, Not Persuasive”
The High Court relied extensively on the principles laid down in Basalingappa v. Mudibasappa (2019) 5 SCC 418, observing:
“Section 139 imposes an evidentiary burden and not a persuasive burden… the standard of proof is that of preponderance of probabilities.”
The accused, when questioned under Section 313 CrPC, gave a plausible explanation that he had issued a blank cheque as security to one Raveendran in connection with a chitty transaction. He alleged that the cheque was later misused by the complainant after being procured from Raveendran. Though he did not produce Raveendran as a witness, the Court found that the burden had already shifted back to the complainant when her claim of financial ability was shaken.
Quoting from Shree Daneshwari Traders v. Sanjay Jain, the Court observed:
“The accused may rely on presumptions of fact… and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant.”
Here, the Court found that not only had the accused raised a probable defence, but the complainant’s own evidence was riddled with inconsistencies, contradictions, and omissions regarding the origin of the funds and the existence of any genuine lending transaction.
“Principles From Chandrappa v. State of Karnataka Reaffirmed – Appellate Court Must Exercise Restraint While Reviewing Acquittal”
Importantly, the Court reiterated that an appellate court must be cautious before interfering with an acquittal. Relying on Chandrappa v. State of Karnataka (2007) 4 SCC 415, the judgment reiterated:
“In case of acquittal, there is double presumption in favour of the accused… If two reasonable conclusions are possible on the basis of the evidence, the appellate court should not disturb the finding of acquittal.”
In the present case, the trial court had correctly appreciated the totality of the evidence and found that the presumption under Section 139 was rebutted. The High Court held that this was a possible view based on evidence, and therefore, no interference was warranted.
Justice Johnson John concluded:
“On a careful re-appreciation of the entire evidence, I find that the view taken by the trial court is a possible view… and therefore, I find that this appeal is liable to be dismissed.”
This judgment reinforces that prosecution under Section 138 of the NI Act requires more than just a dishonoured cheque. The complainant must convincingly prove the existence of a legally enforceable debt, and the presumption under Section 139 is not absolute. Where the accused provides a credible alternative version, particularly one supported by documentary or circumstantial evidence, the courts will not presume liability merely from the issuance of a cheque.
The Kerala High Court’s refusal to interfere with the acquittal sends a strong message that financial credibility, consistency in testimony, and proof of consideration are essential, and that relying blindly on statutory presumptions without substantiating the underlying transaction may not withstand judicial scrutiny.
Date of Decision: 25 October 2025
