Section 138 NI Act: Blank Cheques Obtained Under Coercion Do Not Constitute Legally Enforceable Debt: Madras High Court

"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." Madras High Court, in a significant ruling, held that an accused can successfully rebut the statutory presumption of a legally enforceable debt under the Negotiable Instruments Act by establishing a probable defence that blank cheques were obtained under coercion.

A bench of Justice C. Saravanan observed that once the accused demonstrates overwhelming evidence of coercion and commercial improbability, the burden of proof firmly shifts back to the complainant to establish their financial capacity and the genuine nature of the transaction.

The appellant-complainant alleged that he advanced Rs. 50 lakhs as earnest money for a property purchase, and the accused issued two cheques to refund the advance, which were subsequently dishonoured. The trial court convicted the accused, but the appellate court reversed this decision, finding that the sale agreement and cheques were coercively obtained by the complainant's father as collateral security for a separate loan after the original mortgaged properties were attached by the Enforcement Directorate. The complainant subsequently filed the present appeal against the order of acquittal.

The primary question before the court was whether the appellate court correctly reversed the conviction by holding that the accused had successfully rebutted the presumption under Section 139 of the Negotiable Instruments Act. The court was also called upon to determine whether the delay in filing a police complaint regarding the alleged coercion was fatal to the defence of the accused.

Statutory Presumption Against The Drawer

The High Court began its analysis by outlining the legal framework governing dishonoured cheques, specifically relying on the legal principles established by the Supreme Court in Bir Singh v. Mukesh Kumar. The bench observed that the law clearly leans in favour of the payee initially, placing the onus on the drawer to disprove the existence of a debt. The court noted that, "Under Section 139 of the Negotiable Instruments Act, 1881, there is a presumption drawn in favour of the holder of a cheque that the holder received the cheque from the drawee for the discharge of debt or other liability, whether in whole or in part, of any debt."

Standard Of Rebuttal By The Accused

Delving into the evidentiary standard required to defeat this presumption, the court clarified that the accused is not required to prove their defence beyond all reasonable doubt. Instead, raising a commercially sound and probable defence is legally sufficient. The bench observed that, "For the Respondent/Accused as the drawer of the cheque to shift the burden cast under Section 139 of the Negotiable Instruments Act, 1881, it was sufficient for the Respondent/Accused to make out a case that there was no preponderance of probability for issuance of Ex.P1... and Ex.P2... for the discharge of a debt or other liability."

Impact Of Coercion On Negotiable Instruments

The court scrutinised the surrounding circumstances of the transaction, placing heavy emphasis on the collateral dispute involving the complainant's father and the Enforcement Directorate's attachment of properties. The bench completely rejected the trial court's conclusion that the accused's delay in approaching the police regarding the coercion nullified her defence. Holding that the evidence on record strongly supported the accused's version, the judge stated, "there is overwhelming evidence to infer that Ex-P8 Sale Agreement dated 13.01.2014 and Ex.P1... and Ex.P2... were obtained under coercion."

"Though, there has also been a delay in approaching the Land Grabbing Cell regarding the events surrounding the execution of Ex.P8-Sale Agreement... it is sufficient to conclude that the Respondent/Accused has shifted the burden on the Appellant/Complainant."

Complainant Must Prove Financial Capacity

Having found that the accused successfully raised a probable defence, the court examined whether the complainant had independently proved the underlying transaction. The bench highlighted the commercial improbability of a buyer paying a massive sum of Rs. 50 lakhs as an advance in cash for a property worth Rs. 55 lakhs, while allowing a full year to pay the minor remaining balance of Rs. 5 lakhs. Furthermore, the court noted the complainant's failure to produce income tax returns or bank statements to prove his financial capacity to advance such a large cash amount.

Failure To Establish Legally Enforceable Debt

The court ultimately concluded that the technical defects in the unregistered sale agreement, combined with the explicit admission by the Notary Public that no cash exchanged hands in his presence, completely demolished the complainant's case. The bench decisively ruled, "Therefore, it was incumbent for the Appellant/Complainant prove that Ex.P1... and Ex.P2... were indeed issued by the Respondent/Accused for the discharge of a debt, arising out of execution of Ex.P8 – Sale Agreement."

The Madras High Court dismissed the criminal appeal, firmly upholding the appellate court's order of acquittal. The bench ruled that the decision to reverse the trial court's judgment did not merit any interference, while granting the appellant liberty to pursue civil remedies in accordance with the law.

Date of Decision: 13 July 2026