Supreme Court Reaffirms Statutory Presumption Under NI Act – Mere Denial by Accused Insufficient to Rebut Liability
- REEDLAW
- 6 days ago
- 3 min read
The Supreme Court reaffirmed the statutory presumption under the Negotiable Instruments Act, holding that mere denial by the accused was insufficient to rebut liability.
On 02-04-2025, the Supreme Court Bench of Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah reviewed an appeal and held that the statutory presumption under Sections 118 and 139 of the Negotiable Instruments Act, 1881, operates in favor of the complainant unless the accused rebuts it with cogent evidence. The Court emphasized that mere denial or failure to establish the complainant’s financial capacity is insufficient to displace this presumption. It further held that the High Court erred in setting aside the concurrent findings of conviction by improperly shifting the burden of proof onto the complainant, thereby restoring the Trial Court’s conviction.
The Supreme Court adjudicated upon an appeal challenging the High Court’s judgment, which had set aside the concurrent findings of guilt recorded against respondent no.2 in a case under Section 138 of the Negotiable Instruments Act, 1881. The appellant, the complainant, alleged that he had advanced a loan of Rs. 22,00,000/- to the accused, who, upon demand, issued a cheque dated 17.03.2010. When presented for encashment, the cheque was dishonored with the endorsement ‘payment stopped by drawer.’ Despite issuing a legal notice, the appellant received no response, leading to the initiation of criminal proceedings. The Trial Court convicted the accused, sentencing him to one year of simple imprisonment and imposing a fine of Rs. 35,00,000/-, with Rs. 30,00,000/- payable as compensation to the complainant. This conviction was upheld by the Appellate Court. However, the High Court, in revision, acquitted respondent no.2, holding that the complainant had failed to establish the loan transaction and the existence of a legally enforceable debt.
The Supreme Court scrutinized whether the High Court erred in interfering with the findings of the lower courts, particularly regarding the presumption under Sections 118 and 139 of the Negotiable Instruments Act. The appellant contended that the accused had admitted during cross-examination that he informed the police about the alleged loss of the cheque only in 2011, after the cheque had already been presented in 2010. The appellant further asserted that the High Court incorrectly shifted the burden onto him to establish the source of funds, whereas the statutory presumption operated in his favor. The accused, on the other hand, argued that the cheque was lost and misused by the complainant and that the absence of any documentary evidence of the financial transaction undermined the complainant’s case.
The Supreme Court observed that the accused’s claim of having reported the loss of the cheque to the police was inconsistent with the documentary evidence, as the intimation dated 12.03.2010 was actually received by the police only in 2011. This delay cast doubt on the accused’s defense and reinforced the statutory presumption in favor of the complainant. Furthermore, the Court addressed the argument regarding the drawer of the cheque, noting that respondent no.2, as a partner of the firm M/s Sun Enterprises, had signed the cheque and was liable under Section 138 of the NI Act. Referring to settled precedents, the Court concluded that the complaint was maintainable.
The Supreme Court further emphasized that the High Court had erroneously presumed an obligation on the complainant to prove his financial capacity at the outset, despite the accused not having effectively rebutted the presumption in his favor. Since the complainant had stated in his deposition that he withdrew the amount from a bank, the burden of proof had shifted to the accused to disprove the existence of the debt. The Court held that the High Court had misdirected itself in its approach, setting aside a well-reasoned conviction without sufficient justification. Accordingly, the Supreme Court reversed the High Court’s judgment and restored the conviction and sentence imposed by the lower courts, reaffirming the statutory presumption in favor of the complainant.
Mr. Pinaki Addy, Advocate, represented the Appellant.
Mr Shadan Farasat, Senior Advocate, appeared for the Respondents.
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