Section 138 NI Act | Accused Merely Required To Establish 'Probable Defence' To Shift Burden Of Proof Onto Complainant: Madras High Court

"Respondent/Accused is merely required to make out a probable defence to shift the burden on the Appellant/Complainant." Madras High Court, in a significant ruling, held that an accused in a cheque bounce case is not required to prove their defence beyond all reasonable doubt, but only needs to establish a "probable defence" to rebut the statutory presumption under Section 139 of the Negotiable Instruments Act, 1881.

A bench of Justice C. Saravanan observed that once such a probable defence is established by pointing out glaring inconsistencies in the complainant's case, the burden of proof shifts heavily back onto the complainant to establish the existence of a legally enforceable debt.

The appellant-complainant claimed to have advanced Rs 50 lakhs in cash to the accused as earnest money for the purchase of a house property worth Rs 55 lakhs, executing an unregistered Sale Agreement in January 2014. The complainant alleged that the accused later issued two cheques totalling Rs 50 lakhs to refund the advance, which were subsequently dishonoured upon presentation.

The Trial Court convicted the accused under Section 138 of the NI Act, largely relying on the admission of signatures on the cheques and the agreement. However, the First Appellate Court reversed this conviction, finding that the accused had successfully demonstrated that the documents were obtained under coercion due to an underlying loan dispute involving her husband and the complainant's father. Aggrieved by the acquittal, the complainant preferred the present criminal appeal before the High Court.

The primary question before the High Court was whether the First Appellate Court was justified in reversing the Trial Court's conviction by concluding that the accused had successfully rebutted the statutory presumption under Section 139 of the NI Act.

Statutory Presumptions Under The NI Act

The High Court commenced its legal analysis by examining the scope of presumptions embedded within the Negotiable Instruments Act. The court noted that Section 139 of the Act mandates a presumption in favour of the holder that the cheque was received for the discharge, in whole or in part, of any debt or other liability.

The bench acknowledged the settled legal position, heavily relying on the Supreme Court's pronouncement in Bir Singh vs. Mukesh Kumar. The court reiterated that a person who signs a cheque and hands it over remains liable unless they adduce sufficient evidence to rebut the presumption that it was issued for a legally enforceable debt.

Establishing A Probable Defence

Addressing the standard of proof required by the accused, the High Court clarified that the burden cast under Section 139 is not absolute. The bench emphasized that it was entirely sufficient for the accused to demonstrate a "preponderance of probability" that the cheques were not issued for the discharge of any debt.

The court carefully examined the compelling circumstances surrounding the execution of the primary documents. It noted the admitted position that the accused's husband owed money to the complainant's father, and that a police complaint regarding coercion had been filed months before the cheque bounce proceedings were initiated.

"Though, the Respondent/Accused... has neither denied her signature on them nor execution of Ex.P8-Sale Agreement dated 13.01.2014, yet it cannot be held to be fatal to the defence of the Respondent/Accused."

Evidentiary Gaps And Commercial Improbability

The High Court placed significant weight on the First Appellate Court's factual findings regarding the structural improbabilities of the transaction. The court highlighted that an allegedly massive cash advance of Rs 50 lakhs was documented on a mere unregistered agreement that completely lacked a Notary Advocate's serial number.

Furthermore, the court noted the stark commercial improbability of the contract's terms. The agreement suspiciously allowed a long period of one year for the payment of a mere Rs 5 lakh balance, despite a massive advance payment allegedly having been made. The court also observed that the original sale agreement curiously remained in the possession of the accused seller, raising serious doubts about the actual completion of the transaction.

Complainant's Failure To Prove Financial Capacity

Crucially, the High Court concurred with the lower appellate court that the complainant completely failed to discharge the reverse burden of proof. The bench noted that once the accused highlighted these structural and evidentiary flaws, the complainant was strictly required to prove their financial capacity to advance Rs 50 lakhs in cash.

The court observed that the failure of the complainant, a businessman, to produce essential financial records such as Income Tax Returns and corresponding bank statements to prove cash liquidity was ultimately fatal to his case.

"In my view, the Respondent/Accused had discharged the burden by shifting onus under Section 139 of the Negotiable Instruments Act, 1881 onto the Appellant/Complainant to prove that indeed, a sum of Rs.50 lakhs was advanced towards sale consideration in cash."

The High Court concluded that there was overwhelming evidence to infer that the sale agreement and the subject cheques were obtained under coercion. Upholding the reversal of the conviction, the court dismissed the criminal appeal, holding that the First Appellate Court's judgment of acquittal did not merit any interference. The appellant was granted liberty to pursue appropriate civil remedies in accordance with the law.

Date of Decision: 13 July 2026