The Supreme Court has reaffirmed an important principle governing cheque dishonour cases under Section 138 of the Negotiable Instruments Act, 1881. The Court held that once the execution or signature of a cheque is admitted or established, the statutory presumptions under Sections 118 and 139 of the NI Act operate in favour of the complainant.
A mere denial that no consideration was received or that no legally enforceable debt existed is not sufficient to rebut these presumptions. The accused must place credible facts and circumstances on record which make the defence probable.
The judgment was delivered by a Bench comprising Justice B V Nagarathna and Justice Ujjal Bhuyan in Kuntegowda v. Thurubaiah on August 4, 2026.
Supreme Court on Presumption Under Sections 118 and 139
Section 118 of the Negotiable Instruments Act creates a presumption that a negotiable instrument was made or drawn for consideration. Section 139 further presumes, unless the contrary is proved, that the holder of a cheque received it for the discharge, wholly or partly, of a debt or other legally enforceable liability.
The Supreme Court clarified that these statutory presumptions cannot ordinarily be displaced by a simple or bare denial from the accused.
According to the Court, the accused must bring on record facts and circumstances which, when considered objectively, may persuade the court that the alleged consideration or debt did not exist. Alternatively, the circumstances must be sufficiently probable that a prudent person would accept the accused’s version.
Thus, the burden on the accused at the rebuttal stage is not necessarily to establish the defence beyond reasonable doubt. However, the accused must raise a probable and credible defence capable of creating doubt regarding the existence of the underlying liability.
Facts of the Cheque Dishonour Case
The dispute arose from an alleged hand loan of ₹4.5 lakh. The complainant’s case was that the accused, Thurubaiah, had borrowed the amount for purchasing a site and subsequently issued a cheque in December 2010 towards repayment.
The cheque was ultimately dishonoured in March 2013. Following the dishonour, the complainant initiated proceedings under Section 138 of the NI Act.
The trial court found the accused guilty and imposed a fine of ₹9 lakh. The Sessions Court also upheld the conviction.
However, the Karnataka High Court, exercising revisional jurisdiction, interfered with the conviction and set aside the orders of the courts below.
The matter subsequently reached the Supreme Court.
Defence of Blank Cheque Rejected
Before the courts, the accused attempted to contend that he had borrowed only ₹40,000 from S.B. Ramachandraiah and had handed over a blank cheque to him. According to the defence, the cheque was subsequently misused by the complainant.
The Supreme Court found this defence unconvincing.
The Court noted that if the accused genuinely believed that his cheque or other documents had been misappropriated or misused, he could reasonably have been expected to take appropriate steps for their recovery or initiate legal proceedings.
However, no meaningful action had been taken by the accused to recover the alleged cheque or establish that it had been unlawfully misused.
The Court therefore described the defence as a “frivolous and feeble attempt” to rebut the complainant’s case.
Financial Capacity Defence Must Be Specifically Raised
Another important issue before the Supreme Court concerned the complainant’s alleged financial capacity to advance the ₹4.5 lakh loan.
The Court rejected the argument that the complainant was required, in the first instance, to establish his financial capacity to lend the amount.
The Supreme Court observed that where the accused intends to challenge the complainant’s financial capacity, such a defence should be specifically raised and supported by circumstances capable of making the plea probable.
The Court also attached significance to the accused’s failure to respond appropriately to the statutory demand notice.
Where the accused receives a statutory notice but does not raise a material defence at that stage, the subsequent introduction of such a defence during trial may carry less persuasive value, depending upon the facts of the case.
Signature on Cheque Has Important Consequences
The Supreme Court further emphasized the significance of the accused’s admitted signature on the cheque.
Where the signature is admitted or proved, the statutory presumptions under Sections 118 and 139 become applicable unless effectively rebutted.
The Court observed that the necessary consequence of proving the signature is that the accused is presumed to have knowledge of the contents of the cheque, unless the contrary is established through credible evidence.
Therefore, simply stating that a signed blank cheque was issued for some other purpose does not automatically defeat the complainant’s case.
The accused must produce sufficient material to establish the circumstances in which the cheque came into the complainant’s possession and explain why the cheque should not be treated as having been issued towards a legally enforceable liability.
Supreme Court on Revisional Jurisdiction
The judgment also addresses the limits of revisional jurisdiction.
The Supreme Court held that a revisional court should not ordinarily function as an appellate court by undertaking an elaborate reappraisal of evidence merely because another interpretation of the facts is possible.
In revision, the court primarily examines whether the findings suffer from illegality, incorrectness, impropriety, perversity or other serious defects warranting interference.
In the present case, the Supreme Court found that the Karnataka High Court had gone into considerable detail while reassessing the oral and documentary evidence and effectively reconsidered the merits as an appellate court.
The Supreme Court held that such an approach was not justified in the absence of any glaring contradiction, perversity or other compelling circumstance apparent from the record.
Supreme Court Restores Conviction
After examining the evidence, the Supreme Court concluded that the complainant’s oral and documentary evidence was consistent with the prosecution case and that the accused had failed to rebut the statutory presumptions under the NI Act.
The Court therefore held that the Karnataka High Court had erred in exercising revisional jurisdiction to overturn the conviction.
Consequently, the Supreme Court set aside the High Court’s judgment and restored the judgments and orders of the trial court and Sessions Court.
Key Takeaways for Section 138 NI Act Cases
The judgment provides several important lessons for cheque dishonour litigation:
- A bare denial of debt or consideration is insufficient to rebut the statutory presumption.
- Once the cheque signature is admitted or proved, the presumptions under Sections 118 and 139 become significant.
- The accused must raise a probable and credible defence to shift the evidentiary burden back to the complainant.
- A defence based on a misused or blank cheque should be supported by credible evidence and surrounding circumstances.
- A challenge to the complainant’s financial capacity should be specifically raised rather than introduced as an afterthought.
- Failure to respond to a statutory demand notice may adversely affect the credibility of a subsequently raised defence, depending on the facts.
- Revisional courts should not ordinarily reassess evidence as though they were hearing an appeal.
- A conviction should not be interfered with in revision merely because an alternative view of the evidence is possible.
Conclusion
The Supreme Court’s decision in Kuntegowda v. Thurubaiah reinforces the evidentiary framework governing cheque bounce cases under Section 138 of the Negotiable Instruments Act.
The ruling makes it clear that statutory presumptions cannot be defeated by unsupported allegations or a simple denial of liability. Once the foundational requirements are established and the cheque bears the accused’s admitted or proved signature, the accused must present a legally and factually credible defence capable of rebutting the presumption.
At the same time, the judgment serves as an important reminder to revisional courts that their jurisdiction is narrower than appellate jurisdiction. Unless the findings of the subordinate courts suffer from a clear legal or factual defect, revisional interference should be exercised sparingly.
Case Details
Case: Kuntegowda v. Thurubaiah
Court: Supreme Court of India
Bench: Justice B V Nagarathna and Justice Ujjal Bhuyan
Date of Judgment: August 4, 2026
Key Provisions: Sections 118, 139 and 138, Negotiable Instruments Act, 1881