Section 139 is Rebuttable by Circumstantial Doubt - Cheque Bounce Alone Doesn’t Prove Debt: Kerala High Court Affirms Acquittal

“Statutory Presumption under Section 139 is Rebuttable by Circumstantial Doubt” — Kerala High Court delivered a key ruling under the Negotiable Instruments Act, upholding the acquittal of an accused woman in a cheque bounce case. Justice Johnson John, sitting in Ernakulam, held that a cheque dishonour—even if admitted—is not conclusive proof of a legally enforceable debt, especially when the surrounding facts raise “a shadow of doubt” about the existence of such liability.

The Court observed that “the statutory presumption under Section 139 of the N.I. Act is not a conclusive proof but a rebuttable presumption” and “even circumstantial inconsistencies or alternative explanations can demolish the presumption if they appear probable.”

The ruling reinforces that a complainant must go beyond mere production of a cheque, especially when cross-examination exposes contradictions, and the accused provides an alternate, believable explanation for the issuance of the cheque.

“Complainant’s Own Evidence Points to a Gold Transaction, Not a Loan” — High Court Finds Alternate Narrative Sufficient to Acquit Under Section 138

The case stemmed from a cheque dated 19 December 2005 for ₹1,00,000, allegedly issued by the accused Sabitha to discharge a loan taken from ‘Poornima Finance’, a proprietary concern run by the complainant Shailappan. The cheque was dishonoured for insufficiency of funds, and despite statutory notice, the accused failed to repay, prompting criminal proceedings under Section 138.

At trial, however, the accused’s father (examined as DW1) stated that the cheque was not issued towards any loan, but was given as security for gold ornaments purchased for Sabitha’s marriage from Poornima Jewellery, another business owned by the complainant. Supporting documents—Exhibits D1 and D2—corroborated this jewellery purchase.

The complainant admitted during cross-examination that he also ran a jewellery business and that he had dealings with the accused’s family. He confirmed the handwriting on the jewellery transaction slip and acknowledged the existence of the gold estimate.

The Court held that “such admissions are not trivial; they strike at the root of the complainant’s version. Once a plausible alternative purpose for the cheque is admitted by the complainant himself, the legal presumption under Section 139 begins to waver.”

“Failure to Establish Date of Execution and Authority to Sue Casts Fatal Doubt” — High Court Questions Complainant’s Capacity and Consistency

The Court found multiple deficiencies in the complainant’s case that cumulatively weakened his credibility. While he described himself as the Managing Partner of Poornima Finance, no documents were submitted to prove his status or his authority to file the complaint. In cross-examination, he named his wife and daughter as co-partners, yet failed to produce any partnership deed or authorisation.

Justice Johnson John remarked: “Even the most basic foundation—that the complainant had legal standing to sue on behalf of the firm—has not been laid with evidence. That itself casts a doubt on the entire transaction.”

Further, the complainant failed to mention the date of cheque issuance or the execution of the alleged promissory note in either the complaint or his chief affidavit. When cross-examined, he contradicted himself about whether the promissory note was returned to the accused.

“These internal contradictions are not mere omissions—they strike at the very identity of the transaction and the purpose of the cheque,” the Court stated.

“Presumption Under NI Act is Not Absolute—Probabilities Can Rebut It” — Court Applies ‘Preponderance of Probability’ Standard to Uphold Acquittal

Referring to precedents such as Basalingappa v. Mudibasappa, M.S. Narayana Menon v. State of Kerala, and ANSS Rajashekar v. Augustus Jeba Ananth, the High Court reaffirmed that:

“The presumption under Section 139 is rebuttable, and the accused need not prove their case beyond reasonable doubt. The standard is preponderance of probabilities, and even circumstantial inconsistencies or plausible defence is enough.”

The complainant’s reliance on the Supreme Court’s recent decision in Sanjabij Tari v. Kishore S. Borcar—to argue that the accused’s silence on the statutory notice showed guilt—was dismissed. The Court clarified that “failure to reply to notice is not decisive if the accused can establish a probable alternative explanation, which, in this case, was sufficiently done.”

“Cheque Issued in Jewellery Context, Not for Loan Repayment” — High Court Says Trial Court’s Findings Deserve Deference

Affirming the reasoning of the trial court, Justice Johnson John concluded:

“The trial court found that the accused had raised a probable defence by showing that the cheque was issued not for repayment of a debt but in connection with a jewellery purchase. The complainant’s cross-examination and documentary evidence support this version.”

Rejecting the appeal, the Court held: “I find no reason to interfere with the finding in the impugned judgment that the complainant has not succeeded in proving the offence under Section 138 of the N.I Act.”

The appeal was dismissed, and the accused’s acquittal stood confirmed.

Date of Decision: 15 October 2025