The Supreme Court has once again reinforced the legal position governing cheque dishonour cases under the Negotiable Instruments Act, 1881, holding that a mere denial of liability by an accused is insufficient to rebut the statutory presumptions available in favour of the complainant. The Court clarified that once the execution of the cheque or the signature on it is admitted, the burden shifts to the accused to produce credible and probable evidence demonstrating that no legally enforceable debt or liability existed.
The significant ruling was delivered by a Division Bench comprising Justice B.V. Nagarathna and Justice Ujjal Bhuyan in Kuntegowda v. Thurubaiah (SLP (Criminal) No. 2247 of 2024). The judgment also reiterates the limited scope of revisional jurisdiction, emphasizing that High Courts cannot reassess evidence or overturn concurrent findings of conviction merely because another interpretation of the evidence is possible.
Statutory Presumptions Under the Negotiable Instruments Act
Sections 118 and 139 of the Negotiable Instruments Act create a statutory presumption that a cheque has been issued for valid consideration and towards the discharge of a legally enforceable debt or liability. These presumptions come into operation automatically once the execution of the cheque or the signature of the drawer is admitted.
The Supreme Court observed that although these presumptions are rebuttable, the burden of disproving them lies squarely on the accused. A simple or bald denial of liability does not satisfy this burden.
The Court held:
“A bare denial of the passing of any consideration or existence of any debt does not support the defence of the accused and therefore to disprove the presumptions, something which is probable has to be brought on record for getting the burden of proof shifted back to the complainant.”
In other words, the accused must place before the court facts, circumstances, or evidence that make the non-existence of the debt reasonably probable. Only then does the burden shift back to the complainant to establish the liability.
Background of the Dispute
The case arose from a financial transaction dating back to December 2010. According to the complainant, he had advanced a hand loan of ₹4.50 lakh to the accused for purchasing a house site. The loan was agreed to be repaid within one year.
Towards repayment of the loan, the accused issued a cheque. However, when the complainant presented the cheque for encashment, it was dishonoured due to “Funds Insufficient.”
Following the dishonour, the complainant issued the mandatory statutory demand notice under the Negotiable Instruments Act. As the payment was not made within the prescribed period, criminal proceedings under Section 138 of the Act were initiated.
The trial court convicted the accused. The Sessions Court subsequently affirmed the conviction while reducing the amount of fine imposed.
Karnataka High Court Acquitted the Accused
In revision, however, the Karnataka High Court reversed the concurrent findings of the trial court and the appellate court.
The High Court mainly held that the complainant had failed to prove his financial capacity to lend ₹4.50 lakh and concluded that the statutory presumptions under Sections 118 and 139 stood rebutted. Consequently, the accused was acquitted.
Aggrieved by this decision, the complainant approached the Supreme Court.
Supreme Court Rejects the Defence
Before the Supreme Court, the accused contended that the cheque was never issued towards repayment of the alleged ₹4.50 lakh loan. Instead, he claimed that the cheque had been given as security while borrowing only ₹40,000 from one of the prosecution witnesses and that the cheque had subsequently been misused.
The Supreme Court found this defence completely unsupported by evidence.
The Court noted several important shortcomings in the accused’s version:
- No receipt or documentary proof was produced to establish repayment of the alleged ₹40,000 loan.
- The accused failed to show that he had ever demanded the return of the cheque immediately after the alleged repayment.
- No police complaint or civil proceedings were initiated seeking recovery of the cheque.
- The legal notice relied upon by the accused was issued only after the cheque bounce complaint had already been filed and after the complainant’s evidence had been recorded.
The Court described the notice as an afterthought and an ex post facto attempt to create evidence, holding that it carried no evidentiary value in support of the defence.
Financial Capacity of the Complainant
The Supreme Court also disagreed with the Karnataka High Court’s conclusion that the complainant lacked the financial capacity to advance ₹4.50 lakh.
The complainant had consistently explained that he arranged part of the money through financial assistance obtained from relatives and acquaintances. This explanation was corroborated by two witnesses whose testimony remained unshaken during cross-examination.
The Court observed that if the accused genuinely believed that the complainant lacked the financial capacity to lend such an amount, this defence should have been raised at the earliest opportunity, particularly in response to the statutory demand notice.
Notably, the accused had not even replied to the statutory notice, nor had he produced any independent evidence to support his allegation regarding the complainant’s financial incapacity.
Revisional Court Cannot Reappreciate Evidence
Another important aspect of the judgment concerns the powers of the High Court while exercising revisional jurisdiction.
The Supreme Court reiterated that a revisional court is not expected to function as a second appellate court. Its role is confined to examining the legality, correctness, and propriety of the findings recorded by the subordinate courts.
The Bench observed that a High Court cannot reassess evidence afresh or substitute its own conclusions merely because another view is possible.
Interference in revision is justified only when the findings recorded by the lower courts are perverse, illegal, or result in a miscarriage of justice.
Since both the trial court and the Sessions Court had concurrently found the accused guilty after appreciating the evidence on record, the Karnataka High Court exceeded its jurisdiction by re-evaluating the evidence and arriving at a different conclusion without identifying any perversity or legal infirmity.
Accordingly, the Supreme Court set aside the High Court’s judgment and restored the conviction recorded by the trial court as affirmed by the Sessions Court.
Key Legal Takeaways
This judgment further strengthens the jurisprudence governing cheque dishonour prosecutions under Section 138 of the Negotiable Instruments Act. The Supreme Court has reaffirmed that statutory presumptions under Sections 118 and 139 carry substantial evidentiary value and cannot be displaced through mere assertions or unsubstantiated explanations.
The decision also serves as an important reminder that accused persons must produce credible and probable evidence to rebut these presumptions. Unsupported claims, delayed defences, or afterthought documents will not ordinarily suffice.
Equally significant is the Court’s reaffirmation of the limited scope of revisional jurisdiction. High Courts cannot interfere with concurrent findings of fact simply because an alternative interpretation of the evidence appears possible.
The ruling provides valuable guidance for litigants, legal practitioners, and courts dealing with cheque dishonour matters and reinforces the objective of ensuring credibility and certainty in commercial transactions involving negotiable instruments.
Case: Kuntegowda v. Thurubaiah
Case No.: SLP (Criminal) No. 2247 of 2024
Bench: Justice B.V. Nagarathna and Justice Ujjal Bhuyan