The Supreme Court has ruled that mere denial cant rebut NI Act presumption in cheque dishonour cases. The Court clarified that an accused must do more than simply deny liability. A person facing prosecution under the Negotiable Instruments Act must explain how the signed cheque reached the complainant. The ruling came while dismissing a criminal appeal against a remand order passed by the Karnataka High Court.
Supreme Court Clarifies Burden Under Section 139
A Division Bench of Justice Manoj Misra and Justice Vijay Bishnoi reaffirmed that Section 139 of the Negotiable Instruments Act creates a statutory presumption in favour of the complainant. Although the presumption is rebuttable, a simple denial does not satisfy the legal standard.
The Court said the accused must present evidence or explain the circumstances surrounding the issuance of the cheque. Only then can the burden shift back to the complainant.
Background of the Case
The dispute dates back to November 2005. The complainant alleged that Sri Gopalaiah borrowed ₹8.5 lakh. To repay the amount, Gopalaiah allegedly issued two cheques dated February 13, 2006. One cheque was for ₹8 lakh, while the other was for ₹50,000.
Both cheques were presented for payment on February 25, 2006. The bank returned them unpaid because of insufficient funds. The complainant then initiated proceedings under Section 138 of the Negotiable Instruments Act.
Trial Court and High Court Proceedings
On February 12, 2009, the trial court acquitted the accused. It held that the complainant had failed to prove the existence of a legally enforceable debt.
The Karnataka High Court later set aside the acquittal. On October 10, 2013, it remanded the matter to the trial court for fresh consideration. The High Court found that the trial court had not properly evaluated the complainant’s evidence regarding his financial capacity to lend the money.
Supreme Court’s Findings
The Supreme Court agreed that the complainant had produced material to support his financial capacity. It observed that the trial court failed to consider this evidence adequately.
The Bench also restated the law governing the reverse burden under Section 139. It emphasized that mere denial cant rebut NI Act presumption. The accused must explain how the cheque was issued and how it came into the complainant’s possession.
The Court observed:
“No doubt, the presumption under Section 139 of the N.I. Act is rebuttable but mere denial is not sufficient to rebut the presumption. To rebut such presumption the accused, inter alia, would have to explain the circumstances in which the cheque in question came to be issued and as to how it came to be with the payee thereof.”
The Bench further clarified that an accused may rebut the presumption by proving that the complainant lacked the financial capacity to advance the alleged loan. Such evidence can weaken the statutory presumption.
Final Direction
Finding no error in the High Court’s order, the Supreme Court upheld the remand. It directed the trial court to conclude the proceedings without unnecessary delay, noting that the dispute has remained pending since 2006.
