1. Introduction

The Negotiable Instruments Act, 1881 (hereinafter “NI Act”) was enacted to facilitate the use of negotiable instruments such as promissory notes, bills of exchange, and cheques in commercial transactions. The object of the Act is to ensure the sanctity of such instruments and establish trust and credibility in their usage. In the context of cheques, Sections 118 and 139 of the NI Act provide for statutory presumptions in favour of the holder of the cheque, shifting the burden of proof on the drawer (accused) to rebut the same. However, these presumptions are rebuttable and not absolute.

2. Statutory Presumptions under the NI Act

2.1 Section 118 – Presumptions as to Negotiable Instruments

Text of Section 118:
Until the contrary is proved, the following presumptions shall be made:

(a) of consideration,
(b) as to date,
(c) as to time of acceptance,
(d) as to time of transfer,
(e) as to order of endorsements,
(f) as to stamp,
(g) that the holder of a negotiable instrument is a holder in due course.

Legal Interpretation:
This provision presumes that every negotiable instrument was made or drawn for consideration and that every such instrument was accepted or endorsed for consideration. However, these presumptions operate only till the contrary is proved. Therefore, once a credible rebuttal is made, the burden shifts back to the complainant.

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2.2 Section 139 – Presumption in favour of holder

Text of Section 139:

“It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque for the discharge, in whole or in part, of any debt or other liability.“

This provision was added to strengthen the credibility of cheque-based transactions and aims to prevent misuse by dishonest drawers. However, the presumption under this section is rebuttable by the accused.

3. Judicial Interpretation of Presumptions

The Supreme Court and various High Courts have interpreted these presumptions through several landmark judgments:

3.1 Goa Plast Pvt. Ltd. v. Shri Chico Ursula D’Souza, 1996 (4) All MR 40

Facts:
In this case, the accused and complainant were in an employer-employee relationship. The accused claimed that he was not liable to pay any amount and had informed the complainant about the same, much before the cheque was presented.

Held:
The Bombay High Court held that the presumption under Section 139 was rebutted by the accused through cross-examination of the complainant. There was no evidence to show that the accused had any outstanding liability. Hence, the complainant failed to prove that the cheque was issued towards a legally enforceable debt.

3.2 K. Prakashan vs. P.K. Surenderan, 2007(4) RCR (Criminal) 588 (SC)

Held:
The Supreme Court ruled that presumption under Section 139 arises only after the complainant has successfully demonstrated that he had sufficient funds to advance the amount in question. This means that initial burden lies on the complainant to show a legally enforceable debt, after which the presumption under Section 139 can operate.

3.3 Purushottamdas Gandhi v. Manohar Deshmukh, 2007 (1) Mh.L.J. 210

Held:
The Bombay High Court observed that if a cheque is handed over without a date, the holder is authorized to insert the date. Such an act does not amount to tampering or material alteration. The six-month period for the validity of the cheque will begin from the date written on the cheque.

3.4 Ashok Badwe vs. Surendra Nighojkar, AIR 2001 SC 1315

Held:
The Supreme Court held that return of cheque with endorsements like “refer to drawer” or “account closed” is equivalent to dishonour for insufficient funds. The drawer cannot escape liability by closing the bank account.

4. Burden of Proof and Rebuttal by Accused

It is now well-established that the burden on the accused to rebut the presumptions under Sections 118 and 139 is not as light as under Section 114 of the Indian Evidence Act, 1872. Still, the accused can rebut the presumptions by:

• Cross-examination of complainant/prosecution witnesses;
• Pleading specific facts and circumstances negating liability;
• Producing documents to show lack of legally enforceable debt;
• Showing absence of consideration, or
• Adducing oral or documentary evidence.

The accused need not necessarily enter the witness box to rebut the presumption.

5. Role of Notice and Dishonour under Section 138

The offence under Section 138 of the NI Act is complete only if:

1. Cheque is dishonoured for insufficient funds or other reasons;
2. Payee issues notice in writing to the drawer within 30 days from receiving bank’s return memo;
3. Drawer fails to pay the cheque amount within 15 days of receiving the notice.

Thus, even after presumption arises under Section 139, the complainant must strictly comply with procedural requirements under proviso to Section 138(c).

6. Important Judicial Guidelines

Case Name	Legal Proposition
Goa Plast Pvt. Ltd. v. Chico D’Souza	Accused can rebut presumption by cross-examination.
K. Prakashan v. P.K. Surenderan	Presumption under Section 139 arises only after showing legally enforceable debt.
Purushottamdas Gandhi v. Manohar Deshmukh	Holder can insert date on undated cheque.
Ashok Badwe v. Surendra Nighojkar	Account closed = insufficient funds under Section 138.

7. Conclusion

The statutory presumptions under Sections 118 and 139 of the NI Act serve as powerful tools to protect the rights of cheque holders and promote confidence in commercial transactions. However, the rebuttable nature of these presumptions ensures that honest drawers are not penalized for misuse or fraud. Courts have struck a delicate balance by insisting that initial burden lies with the complainant to establish a prima facie case, while allowing the accused sufficient opportunity to rebut the presumption through evidence or cross-examination. These principles safeguard both commercial trust and procedural fairness under criminal jurisprudence.