Presumptions Regarding Consideration in Cheque Cases under the NI Act

Saji Koduvath, Advocate, Kottayam.

Relevant Provisions

Sec. 118, 138 & 139 of the NI Act
Sec. 118, Negotiable Instruments Act, 1881, reads as follows:

“118. Presumptions as to negotiable instruments.—Until the contrary is proved, the following presumptions shall be made:—

(a) of consideration:—that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;…”

Sec. 138 of the NI Act reads as under:
138. Dishonour of cheque for insufficiency, etc., of funds in the account.—Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years’, or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless—      
.(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;     
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and      
(c) the drawer of such a cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation.—For the purposes of this section, “debt of other liability” means a legally enforceable debt or other liability.

Sec. 139 of the NI Act reads as under:
“139. Presumption in favour of holder –  It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.”

Presumptions on Consideration

Under Section 118(a) of the Negotiable Instruments Act, 1881, it is presumed that a negotiable instrument has been executed for valid consideration.

The Presumption can be Rebutted by Evidence as to Lack of Consideration

The presumption under Sec. 118 arises only if the signature in the cheque is proved or admitted. It can be rebutted by evidence as to

  • (i) lack of consideration or
  • (ii) improper execution.

Conflict on Nature of Evidence Required to Rebut the Presumption

The Conflict is between “Cogent Evidence” and “Preponderance of Probabilities”.

  • The First stricter view (on Cogent Evidence) is taken in Bir Singh v. Mukesh Kumar, 2019-4 SCC 197.
  • But the weight of authorities is in favour of the second view (on Preponderance of Probabilities). The following are the leading decisions-
    • Rajaram v.  Maruthachalam, AIR 2023 SC 471;
    • Oriental Bank of Commerce v. Prabodh Kumar Tewari, 2022-7 SCR 72;
    • Triyambak S.  Hegde v. Sripad, 2022-1 SCC 742;
    • Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348).
    • Basalingappa v. Mudibasappa – 2019(5) SCC 418
    • K. Subramani v. K. Damodara Naidu, 2015 -1 SCC 99.
    • Vijay v. Laxman, (2013) 3 SCC 86;
    • Rangappa v. Sree Mohan, 2010(11) SCC 441 (Three Judge Bench);
    • M.S. Narayana Menon v. State of Kerala 2006-6 SCC 39;
    • Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16;
    • Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal, (1999) 3 SCC 35)
    • Kali Ram v. State of Himachal Pradesh, (1973) 2 SCC 808.

First View: The Respondent has to Rebut the Presumption with “Cogent Evidence“

In Bir Singh v. Mukesh Kumar, 2019-4 SCC 197, it is held – In view of Sec. 118, if signature in a Cheque is admitted by the accused –

  • the complainant has no burden to prove the loan or other liability.

It is observed (in Bir Singh v. Mukesh Kumar, 2019-4 SCC 197), as to the ‘rebuttal evidence’ on presumption under Section 139, as under:

  • “36. Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.” (This view is reiterated (obiter) by a three-Judge Bench in Kalamani Tex v. P. Balasubramanian, 2021-5 SCC 283.)

Second View: For rebuttal, reasonably probable evidence is sufficient.

According to the second view, the rebutal need not be positively proved to be true.

  • That is, a rebuttal need not be conclusively established to be true.
  • Onus on the accused can be discharged by a preponderance of probabilities.
  • The rebuttal can be by invoking another presumption
  • The accused can rebut the presumption even through circumstantial evidence,
    • suggestions in cross-examination, or
    • inconsistencies in the complainant’s case—
    • as long as a probable defence is made out.
  • It need be reasonably probable.
    • See: Rajaram v.  Maruthachalam, AIR 2023 SC 471;
    • Basalingappa v. Mudibasappa – 2019(5) SCC 418
    • Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16;
    • Vijay v. Laxman, (2013) 3 SCC 86;
    • Kali Ram v. State of Himachal Pradesh, (1973) 2 SCC 808.

Rebuttal: Standard of Proof – Preponderance of Probabilities

The required evidence or Standard of Proof for the ‘rebuttal of presumption’ is –

  • Preponderance of Probabilities 
    • See: Triyambak S.  Hegde v. Sripad, 2022-1 SCC 742;
    • Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348).

Rebuttal: Standard of Proof – Probable Defence’ which ‘Creates Doubts‘

The required evidence or Standard of Proof (for rebuttal of a factual presumption) can be –

  • ‘Probable Defence’ which ‘Creates Doubts‘ about the existence of a legally enforceable debt.
    • Rangappa v. Sree Mohan, 2010(11) SCC 441;
    • M.S. Narayana Menon v. State of Kerala 2006-6 SCC 39;
    • Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal, (1999) 3 SCC 35)

Rebuttal can be by invoking Another Presumption

  • Not necessary for the accused to rebut (consideration) by direct evidence
    • M.S. Narayana Menon v. State of Kerala 2006(6) SCC 39, SB Sinha, J.).
    • See: Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal,  1999-3 SCC 35;
  • Rebuttal (of presumption) can be by invoking another presumption
    • Kundanlal v. Custodian Evacuee property, AIR 1961 SC 1316) Referred to in: Priyamvada K. v. M.  Rahufina, 2024-1 KerHC 245.
  • It can be the circumstances relied upon by the complainant (M.S. Narayana Menon v. State of Kerala 2006-6 SCC 39).
  • On such a ‘shifting’, the source of money and financial capacity of complainant to make the loan can be a point for consideration, and the complainant may have to produce bank-statement to show the alleged loan-payment, or his financial capacity.
    • See: Rajaram v.  Maruthachalam, AIR 2023 SC 471;
    • Basalingappa v. Mudibasappa, 2019-5 SCC 418).
    • K. Subramani v. K. Damodara Naidu, 2015 -1 SCC 99.

Read also: Sec. 138 NI Act (Cheque) Cases: Presumption of Consideration u/s. 118 – Even if ‘Signed Blank Cheque’, No Burden on Complainant to Prove Consideration; But, Rebuttal can be by a Probable Defence

‘APPARENT CONFLICT’ STANDS RESOLVED BY DY CHANDRACHUD, J.

In Oriental Bank of Commerce v. Prabodh Kumar Tewari, 2022-7 SCR 72 (Dhananjaya Y Chandrachud, A S Bopanna, JJ.) after quoting the aforesaid portion in para 36 of Bir Singh v. Mukesh Kumar, the court observed as under:

  • “16. In Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348 a two Judge Bench of this Court, of which one of us (D.Y. Chandrachud J.) was a part, reiterated the decision of the three-Judge Bench of this Court in Rangappa v. Sri Mohan, (2010) 11 SCC 441 on the presumption under Section 139 of the NI Act. The court held:
    • “12. Section 139 of the Act mandates that it shall be presumed, unless the contrary is proved, that the holder of a cheque received it, in discharge, in whole or in part, of a debt, or liability. The expression “unless the contrary is proved” indicates that the presumption under Section 139 of the Act is rebuttable. Terming this as an example of a “reverse onus clause” the three-Judge Bench of this Court in Rangappa held that in determining whether the presumption has been rebutted, the test of proportionality must guide the determination. The standard of proof for rebuttal of the presumption under Section 139 of the Act is guided by a preponderance of probabilities. This Court held thus:
    • “28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.”

‘Apparent Conflict’ Stands Resolved

The ‘apparent conflict’ stands resolved by Oriental Bank of Commerce v. Prabodh Kumar Tewari. It is pointed out –

  • 1. Three-Judge Bench decision in Rangappa v. Sri Mohan holds the field.
  • 2. It is held in Rangappa v. Sri Mohan – ‘It is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. ‘

It is pity to see that several High Courts in India misapply the law in this matter without giving due notice to the well-reasoned analysis in Oriental Bank of Commerce v. Prabodh Kumar Tewari, 2022-7 SCR 72.

PRESUMPTION IS NOT IN ITSELF EVIDENCE

A presumption only makes a prima facie case for a party for whose benefit it exists, and it is not in itself evidence (Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513; Basalingappa v. Mudibasappa – 2019(5) SCC 418).

Presumption u/S. 118(a) – Initial onus only to show Consideration Doubtful

Our Apex Court in Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal, (1999) 3 SCC 35 (V.N. Khare, R.P. Sethi, JJ.), laid down the law as to presumption under Section 118(a) as under:

  • “12. Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non- existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt.”
  • (Quoted in: Maitreya Doshi v. Anand Rathi Global Finance Ltd., AIR 2022 SC 4595;
  • K. S.  Ranganatha v. Vittal Shetty, 2022-1 Crimes(SC) 454; 2021-12 JT 165;
  • K. Prakashan v. P.K. Surendran (2008) 1 SCC 258;
  • Rev.  Mother Marykutty v. Reni C.  Kottaram, 2013-1 SCC 327;
  • Mallavarapu Kasivisweswara Rao v. Thadikonda Ramulu Firm, AIR 2008 SC 2898; 2008-7 SCC 655;
  • Krishna Janardhan Bhat v. Dattatraya G. Hegde, AIR 2008 SC 1325; 2008-4 SCC 54)

Rebuttal of Presumption Explained by SB Sinha, J.

In M.S. Narayana Menon v. State of Kerala, 2006(6) SCC 39, SB Sinha, J., in His Lordship’s stupendous characteristic style explained the legal position as to the ‘proof’ of ‘presumption’, and ‘probable defence‘, as under:

  • “29. In terms of Section 4 of the Evidence Act whenever it is provided by the Act that the Court shall presume a fact, it shall regard such fact as proved unless and until it is disproved. The words ‘proved’ and ‘disproved’ have been defined in Section 3 of the Evidence Act (the interpretation clause) to mean: –
    • “Proved”:  A fact is said to be proved when, after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.
    • “Disproved”: A fact is said to be disproved when, after considering the matters before it the Court either believes that it does not exist, or considers its non-existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it does not exist.”
  • 30. Applying the said definitions of ‘proved’ or ‘disproved’ to principle behind Section 118(a) of the Act, the Court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.”

After quoting aforesaid passage from Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal, (1999) 3 SCC 35, it was continued in M.S. Narayana Menon v. State of Kerala, as under:

  • “32. This Court, therefore, clearly opined that it is not necessary for the defendant to disprove the existence of consideration by way of direct evidence.
  • 33. The standard of proof evidently is  Pre-ponderance of probabilities. Inference of Pre-ponderance of probabilities can be drawn not only from the materials on records but also by reference to the circumstances upon which he relies.
  • 34. Presumption drawn under a statute has only an evidentiary value. Presumptions are raised in terms of the Evidence Act. Presumption drawn in respect of one fact may be an evidence even for the purpose of drawing presumption under another.”

Rebuttal of Presumption- Burden Shifts; Not “Haunt the accused any longer“

On rebuttal of presumption, the burden shifts to the complainant, and thereafter and the burden does not “haunt the accused any longer” (Rajesh Jain v. Ajay Singh, AIR 2023 SC 5018;   2023-10 SCC 148).

Rebuttal: Standard of Proof – Probable defence which Creates Doubts

In Rangappa v. Sree Mohan, 2010(11) SCC 441 (CJI, K.G. Balakrishnan, P. Sathasivam and J.M. Panchal, JJ.), a case related to dishonour of cheque under Sec. 138,  it is observed that preponderance of probable defence, if sufficient to Creates Doubts, may shift the burden. It is held in this decision as under:

  • “28   In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of ‘preponderance of probabilities’. Therefore, if the accused is able to raise a probable defence whichcreates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.“

Para 28 of Rangappa v. Sri Mohan, 2010-11 SCC 441, is quoted in following decisions of our Apex Court –

  • Oriental Bank of Commerce v. Prabodh Kumar Tewari, 2022-7 SCR 72 (Dhananjaya Y Chandrachud, A S Bopanna, JJ.)
  • Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348 (Dhananjaya Y. Chandrachud, M.R. Shah, JJ.)
  • Basalingappa v. Mudibasappa – 2019(5) SCC 418, AIR 2019 SC 1983 (Ashok Bhushan, K.M. Joseph, JJ.)
  • Rohitbhai Jivanlal Patel v. State of Gujarat, AIR 2019 SC 1876; 2019-18 SCC 106 (Abhay Manohar Sapre, Dinesh Maheshwari, JJ.)

In Anss Rajashekar v. Augustus Jeba Ananth, (2020) 15 SCC 348, following Rangappa v. Sri Mohanit (supra), it is held as under:

  • “The standard of proof for rebuttal of the presumption under Section 139 of the Act is guided by a preponderance of probabilities.”

Rebuttal Need Not be Conclusively Established – Basalingappa v. Mudibasappa

Basalingappa v. Mudibasappa, 2019(5) SCC 418 (Ashok Bhushan and K.M. Joseph, JJ.), , is a classic decision on ‘rebuttal of presumption’. In this decision our Apex Court relied on the following earlier decisions to formulate the final propositions.

(i). Kali Ram v. State of Himachal Pradesh, (1973) 2 SCC 808. A Three-Judge Bench of the Supreme Court laid down as under:

  • “23 ……. One of the cardinal principles which has always to be kept in view in our system of administration of justice for criminal cases is that a person arraigned as an accused is presumed to be innocent unless that presumption is rebutted by the prosecutionby production of evidence as may show him to be guilty of the offence with which he is charged. The burden of proving the guilt of the accused is upon the prosecution and unless it relieves itself of that burden, the courts cannot record a finding of the guilt of the accused. There are certain cases in which statutory presumptions arise regarding the guilt of the accused, but the burden even in those cases is upon the prosecution to prove the existence of facts which have to be present before the presumption can be drawn. Once those facts are shown by the prosecution to exist, the Court can raise the statutory presumption and it would, in such an event, be for the accused to rebut the presumption. The onus even in such cases upon the accused is not as heavyas is normally upon the prosecution to prove the guilt of the accused. If some material is brought on the record consistent with the innocence of the accused which may reasonably be true, even though it is not positively proved to be true, the accused would be entitled to acquittal.”

(ii). Bharat Barrel & Drum Manufacturing Co. v. Amin Chand Pyarelal, (1999) 3 SCC 35, considered Sec. 118(a) of the NI Act. Our Apex Court held as under –

  • Once execution of the promissory note is admitted, the presumption under Sec. 118(a) as to consideration would arise; and that such a presumption can be rebutted by raising a probable defence.
  • In such an event, the plaintiff is entitled to rely upon the evidence led by the plaintiff.
  • The court may not insist upon the defendant to disprove the consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt.
  • The bare denial does not appear to be any defence. Something which is probable has to be brought on record for shifting the onus to the plaintiff.
  • To disprove the presumption, the defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that the consideration did not exist or its non-existence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist.

(iii). M.S. Narayana Menon v. State of Kerala, (2006) 6 SCC 39 (Justice S.B. Sinha)

  • Sections 118(a), 138 and 139 of the NI Act was considered in this decision. Referring Union of India v. Pramod Gupta, (2005) 12 SCC 1, it was pointed out that the expression ‘shall presume’ cannot be synonymous with ‘conclusive proof’; and that for rebutting the presumption under Sec. 118(a), a probable defence alone is needed.
  • Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.
  • It is analysed on the principle (as to the definition, “proved”, in Sec. 3 Evidence Act) whether the court believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist.
  • The standard of proof evidently is preponderance of probabilities.
  • Inference of preponderance of probabilities can be drawn not only by direct evidence or from the materials on record; but it can also be by reference to the circumstancesupon which he relies.

(iv). Krishna Janardhan Bhat v. Dattatraya G. Hegde, (2008) 4 SCC 54.

  • An accused for discharging the burden need not examine himself.
  • He can rely on the materials already brought on record. And, also by reference to the circumstances upon which he relies.
  • An accused has a constitutional right to maintain silence.
  • Standard of proof on the part of an accused and that of the prosecution in a criminal case is different.
  • Prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of an accused is “preponderance of probabilities”.

(v). Kumar Exports v. Sharma Carpets, (2009) 2 SCC 513

  • Under Sec. 138 of the NI Act, as soon as the complainant discharges the burden to prove that the instrument was executed by the accused, the rules of presumptions under Sections 118 and 139 help him shift the burden on the accused.
  • A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists.
  • The phrase “until the contrary is proved” in Section 118 and use of the words “unless the contrary is proved” in Section 139 of the Act read with definitions of “may presume” and “shall presume” as given in Section 4 of the Evidence Act, makes it clear that presumptions to be raised under both the provisions are rebuttable.
  • When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed.
  • And when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over.
  • The court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated.
  • But, the bare denial of consideration and debt, apparently would not serve the purpose. Something which is probable has to be brought on record to shift  the burden to the complainant.
  • The accused should bring facts and circumstances, which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist.

(vi) Rangappa v. Sri Mohan, (2010) 11 SCC 441 (Three-Judge Bench)

  • It was a case under Sec. 138 and 139 where the accused had admitted signatures on the cheque.
  • It gives only an initial presumption which favours the complainant.
  • This Court held that the presumption as to a legally enforceable debt or liability could be rebutted and the onus is then on the accused to raise a probable defence. It is an example of ‘reverse onus’.
  • The defendant-accused cannot be expected to discharge an unduly high standard of proof.
  • The accused need not adduce evidence of his/her own.

Principles Formulated in Basalingappa

Finally, in Basalingappa v. Mudibasappa, 2019(5) SCC 418, the Court summarised the principles as under:

  • “23. We having noticed the ratio laid down by this Court in above cases on Sections 118(a) and 139, we now summarise the principles enumerated by this Court in following manner:-
  • .(i) Once the execution of cheque is admitted Section 139 of the Act mandates a presumption that the cheque was for the discharge of any debt or other liability.
  • (ii) The presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that ofpreponderance of probabilities.
  • (iii) To rebut the presumption, it is open for the accused to rely on evidence led by him or accused can also rely on the materials submitted by the complainant in order to raise a probable defence. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which they rely.
  • (iv) That it is not necessary for the accused to come in the witness box in support of his defence, Section 139 imposed an evidentiary burden and not a persuasive burden,
  • (v) It is not necessary for the accused to come in the witness box to support his defence.”

It is for the Accused to rebut the Presumptions under S. 139

In Ajitsinh Chehuji Rathod v. State of Gujarat, 2024 SCC OnLine SC 77, it is held that the Certified copy of a document issued by a Bank is itself admissible under the Bankers’ Books Evidence Act, 1891 without any formal proof thereof. Hence, in an appropriate case, the certified copy of the specimen signature maintained by the Bank can be procured with a request to the Court to compare the same with the signature appearing on the cheque by exercising powers under Section 73 of the Evidence Act, 1872. Further, it is held, it is for the accused to rebut such presumptions by leading appropriate defence evidence and the Court cannot be expected to assist the accused to collect evidence on his behalf.

Standard of Proof for Rebutting Presumption in Criminal Law

In Rajaram v.  Maruthachalam, AIR 2023 SC 471 (B.R. Gavai, M.M. Sundresh, JJ.), it is held as under:

  • “24. It can thus be seen that in the facts of the said case, this Court found that the defence raised by the appellants/accused did not inspire confidence or meet the standard of ‘preponderance of probability’.
  • 25. In the present case, we are of the considered opinion that the defence raised by the appellant satisfies the standard of ‘preponderance of probability’.”

Rajaram v.  Maruthachalam, AIR 2023 SC 471, stands as an authority that emphasises the law that the standard of proof for rebutting the presumption in criminal law (as regards cheque-bounce cases also) is that of ‘benefit of doubt‘ and ‘preponderance of probabilities‘. It is held as under:

  • “After taking into consideration the defence witnesses and the attending circumstances, the learned Trial Court found that the defence was a possible defence and as such, the accused was entitled to benefit of doubt. The standard of proof for rebutting the presumption is that of preponderance of probabilities.“

Proposition on cogent evidence to rebut the presumption is found not applicable in this case. It was observed as under:

  • “26. Insofar as the reliance on the judgment of this Court in the case of Rohitbhai Jivanlal Patel v. State of Gujarat and Anr. (AIR 2019 SC 1876; 2019-18 SCC 106) is concerned, in the said case, the learned Trial Court had acquitted the accused, the High Court, in appeal, reversed the acquittal and convicted the accused for the offence punishable under Section 138 of the N.I. Act.
  • Affirming the order of the High Court, this Court held that merely by denial or merely by creation of doubt, the accused cannot be said to have rebutted the presumption as envisaged under Section 139 of the N.I. Act. This Court held that unless cogent evidence was led on behalf of the accused in defence of his case, the presumption under Section 139 of the N.I. Act could not be rebutted. As such, the said judgment also would not be applicable to the facts of the present case.”

Financial capacity of the Complainant

  • Financial capacity of the complainant can be a point in ‘probable defence’ (Rajaram v.  Maruthachalam, AIR 2023 SC 471).
    • That is, the respondent can also show – complainant had no financial capacity.
  • And, the respondent is so poor that the complainant did not have issued large amount by way of loan.
  • Or, the complainant inserted the amount to befit or match his income in Bank Account from some source, or withdrawal for some other purpose.

Complainant – May Have to Produce Bank-Statement

In K. Subramani v. K. Damodara Naidu, 2015 (1) SCC 99, it is held that on rebuttal, source of income of complainant may have to be proved by production of bank-statement.

Source of Money and Capacity – Can Be A Point

In Basalingappa v. Mudibasappa, 2019(5) SCC 418, it was held that the financial capacity can be a point if questioned; and that it was incumbent on complainant, and he has the burden, to explain his financial capacity.  In K.K. Divakaran v. State of Kerala 2016(4) KLJ 273,it is found that the believability of source of money of the complainant and his capacity can be a point, on rebuttal of presumption on consideration.

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Legally recoverable debt (presupposed in S. 138) v. “Discharge of debt or liability” (S. 139)

  • Sec. 138 requires evidence on “legally enforceable debt“.
  • Sec. 139 provides for presumption – holder of the cheque received it for the discharge of debt or other liability.

A question arises on analysis of both these provisions – does Sec. 139 refer to “legally enforceable debt”.

The answer is ‘No’.

In Krishna Janardhan Bhat v. Dattatraya G. Hegde1 reported in [2008 (1) SCALE 421] it is held as under:

  • “19. Indisputably, a mandatory presumption is required to be raised in terms of Section 118(b) and Section 139 of the Act. Section 13(1) of the Act defines ‘negotiable instrument’ to mean “a promissory note, bill of exchange or cheque payable either to order or to bearer”.
  • Sec. 138 of the Act has three ingredients, viz.:
    • (i) that there is a legally enforceable debt;
    • (ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes a legally enforceable debt; and
    • (iii) that the cheque so issued had been returned due to insufficiency of funds.
  • 20. The proviso appended to the said section provides for compliance of legal requirements before a complaint petition can be acted upon by a court of law. Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act. It merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability.
  • 21. The courts below, as noticed hereinbefore, proceeded on the basis that Section 139 raises a presumption in regard to existence of a debt also. The courts below, in our opinion, committed a serious error in proceeding on the basis that for proving the defence the accused is required to step into the witness box and unless he does so he would not be discharging his burden. Such an approach on the part of the courts, we feel, is not correct.
  • 22. An accused for discharging the burden of proof placed upon him under a statute need not examine himself. He may discharge his burden on the basis of the materials already brought on records. An accused has a constitutional right to maintain silence. Standard of proof on the part of an accused and that of the prosecution in a criminal case is different.” (Quoted in Vishnu Dutt Sharma v. Daya Sapra, 2009-13 SCC 729 : S.B. Sinha and Dr. Mukundakam Sharma, JJ.)

Cheque Cannot be an Inchoate Stamped Instruments – Sec. 20, NI Act

Sec. 20, NI Act reads as under:

  • “20. Inchoate Stamped Instruments—Where one person signs and delivers to another a paper STAMPED in accordance with the law relating to negotiable instruments then in force in  India, and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the STAMP. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount:
  • Provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder.”

Kerala High Court, in C.T. Joseph v. I.V. Philip, AIR 2001 Ker 300, held as under:

  • 14. … So far as Section 20 of the Negotiable Instruments Act is concerned, according to us, it does not apply because Section 20 applies only with regard to inchoate negotiable instruments. So far as the cheques are concerned, they don’t require any stamp under the Stamp Act in force.”
  • 15. The Lahore High Court in Dower v. Sohan Lal, AIR 1937 Lahore 816 have held that insofar as the cheque do not require to be stamped, Section 20 of the Negotiable Instruments Act is not applicable. Learned counsel for the plaintiff then submitted that even if the principles under Section 20 of the Negotiable Instruments Act do not apply, the general principles of law of estoppel will apply. Learned counsel also cited some decisions to show that the general principles of law of estoppel will apply. But according to us, for the application of such principles, it is highly necessary that the cheque was issued and filled up as authorised.”

In Raj Kumar v. Ram Krishan, 2016 ACD 689; ILR 2016-3 HP 416, Tarlok Singh Chauhan, J., (as he then was) expressed his view on Sec. 20 in strong words, as under:

  • “5. I am at a complete loss to understand as to on what basis the learned Magistrate applied Section 20 of the Act. Section 20 speaks about a stamped, incomplete, inchoate instrument delivered to any person with prima facie authority to complete the instrument and encash the same. The learned Lahore High Court in A.R. Dower versus Sohan Lal AIR 1937 (Lah) 816 held that Section 20 relating to the encashability of the inchoate stamped instrument will not apply to the cheque as it does not require stamp.
  • 6. Following the aforesaid ratio, a Division Bench of the learned Kerala High Court in C.T. Joseph versus I.V.Philip AIR 2001 (Ker) 300 has observed that Section 20 of the Negotiable Instruments Act will not apply to the cheque as the same does not require any stamp under the Stamp Act and the aforesaid provision would apply to other incomplete, inchoate instruments which require stamp under the Stamp Act.
  • 7. The learned Madras High Court in S. Gopal versus D. Balachandran 2008 1 CTC 491 held that bare reading of Section 20 of the Negotiable Instruments Act would go to show that it would apply only to stamped instrument viz. pronote and bill of exchange and not to cheques.”

But in S. Gopal v. D. Balachandran, 2008-1 CTC 491, the Madras High Court pointed out that sec. 20 is not attracted merely because a physically incapacitated defendant allowed the plaintiff to fill out the cheque. The Court said as under:

  • “9. The aforesaid authority does not run counter to the provision under section 20 of the Negotiable Instruments Act. As rightly observed therein, there is no law which prescribes that a cheque shall be filled up by the drawer himself. If such proposition is accepted, no unlettered person, who knows only to sign his name, can ever be a drawer of a cheque. Further, a person who is physically incapacitated to fill up the cheque cannot also draw a cheque and negotiate it. Of course, as far as the other negotiable instruments viz., pronotes and bills of exchange, there is a clear mandate under section 20 of the Negotiable Instruments Act to the effect that such an instrument can be negotiated by the maker thereof by simply signing and delivering the same to the holder in due course giving thereby ample authority to the latter to fill up the content of the instrument as intended by the maker thereof.
  • 10. Even in case of a cheque, as there is no clear provision in the Negotiable Instruments Act, in the light of the above discussion, the court finds that if a drawer of a cheque gives authority to the payee or holder in due course or a stranger for that matter to fill up the cheque signed by him, such an instrument also is valid in the eye of law. There is no bar for the drawer of a cheque to give authority to a third person to fill up the cheque signed by him for the purpose of negotiating the same.”

“Payee May Fill Up the Amount and Other Particulars” in Bir Singh v. Mukesh

In Bir Singh v. Mukesh Kumar, 2019-4 SCC 197. It is held referring Sec. 20, NI Act that it is immaterial who filled the cheque. The Apex Court said as under:

  • “38. If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars.”
  • “40. Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.”
  • “42. In the absence of any finding that the cheque in question was not signed by the respondent-accused or not voluntarily made over to the payee and in the absence of any evidence with regard to the circumstances in which a blank signed cheque had been given to the appellant-complainant, it may reasonably be presumed that the cheque was filled in by the appellant-complainant being the payee in the presence of the respondent–accused being the drawer, at his request and/or with his acquiescence. The subsequent filling in of an unfilled signed cheque is not an alteration. There was no change in the amount of the cheque, its date or the name of the payee. The High Court ought not to have acquitted the respondent-accused of the charge under Section 138 of the Negotiable Instruments Act.”
  • Note: 1. Bir Singh v. Mukesh Kumar (R. Banumathi, Indira Banerjee, JJ.) , 2019-4 SCC 197, is an odd decision, as regards ‘consideration’.
  • 2. On a close reading of this decision, the following emerges:
    • i. The words “towards some payment” cast “some” ‘strong‘ onus on the claimant.
    • ii. The presumption invoked in this matter is not one from NI Act; but from Section 114 of the Evidence Act.
    • iii. The presumption must be one that can be invoked in the circumstances of the case – that is, there must have ‘something’ to take:
      • “it may reasonably be presumed that the cheque was filled in by the appellant-complainant being the payee in the presence of the respondent–accused being the drawer, at his request and/or with his acquiescence“.
  • 3. In K. Ramesh v. K. Kothandaraman (B.V. Nagarathna, Augustine George Masih, JJ.), 2024-1 KCCR 693; 2024-1 LawHerald(SC) 475, followed Bir Singh v. Mukesh Kumar, 2019-4 SCC 197, (it appears) without noticing the above two points.
  • 4. The view in Bir Singh (on cogent evidence) is reiterated (obiter) by a three-Judge Bench in Kalamani Tex v. P. Balasubramanian, 2021-5 SCC 283.
  • Read: An Inchoate Cheque (Signed Blank Cheque or Incomplete Cheque) Cannot be Enforced Through a Court of Law Invoking Presumptions under the NI Act
  • Sec. 138 NI Act (Cheque) Cases: Presumption of Consideration u/s. 118 – Even if ‘Signed Blank Cheque’, No Burden on Complainant to Prove Consideration; But, Rebuttal can be by a Probable Defence

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