The presumption under Section 139 of the N.I. Act operates in favor of the holder of a cheque, and the burden is on the accused to disprove the existence of a legally recoverable debt or liability.

ORDER :

1. Leave granted.

2. In our opinion, the impugned judgment passed by the High Court of Kerala, Ernakulam dated 24.07.2015, dismissing the appeal preferred by the appellant – Jain P. Jose, against the judgment of the trial court dated 17.03.2015, cannot be sustained. An order of remand is required.

3. The judgment under challenge reasons that the appellant – Jain P. Jose had admitted that the entries/details in the cheque bearing No. 054984 dated 02.02.2010 for a sum of Rs.9,32,000/- (Rupees Nine Lakhs Thirty Two Thousand Only) drawn on South Malabar Gramin Bank, Olarikkara Branch, Thrissur, were not in the hand of the accused/respondent-Santosh. Hence, the presumption under Sections 118 and 139 of Negotiable Instruments Act, 1881¹[For short, the N.I. Act.] does not arise. Accordingly, the High Court agreed with the reasoning given by the trial court that the appellant – Jain P. Jose, was not able to adduce sufficient evidence that he was in a position to advance a loan of Rs. 9 lakhs to the respondent. The High Court relied on the judgment of this Court in “John K. Abraham v. Simon C. Abraham”, (2014) 2 SCC 236.

4. It is an accepted and admitted position that the respondent accepts his signature on the aforesaid cheque. Interestingly, the respondent had issued notice marked as Exhibit -P3, in which he has stated that the appellant -Jain P. Jose had given loan of Rs. 5 lakhs, albeit, claimed that the loan was taken by the respondent's brother-in-law – Anil. In the notice (Exhibit -P3), the respondent claimed that he had given the aforesaid cheque signed by him to his brother-in-law – Anil from whom he had taken a loan of Rs. 5 lakhs. Subsequently, his brother-in-law-Anil was involved in criminal cases.

5. In the aforesaid factual background, we do not think that the High Court was right in holding that the onus was not on the respondent to show that the debt was neither due nor payable. Sections 118 and 139 of the N.I. Act, read:

118. Presumptions as to negotiable instruments.— Until the contrary is proved, the following presumptions shall be made:-

(a) of consideration — that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;

(b) as to date —that every negotiable instrument bearing a date was made or drawn on such date;

(c) as to time of acceptance —that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity;

(d) as to time of transfer —that every transfer of a negotiable instrument was made before its maturity;

(e) as to order of indorsements —that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon;

(f) as to stamps —that a lost promissory note, bill of exchange or cheque was duly stamped;

(g) that holder is a holder in due course — that the holder of a negotiable instrument is a holder in due course:

Provided that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him.

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139. Presumption in favour of holder.—It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.

Referring the Sections of the N.I. Act, a three Judges Bench of this Court in “T. Vasanthakumar Vs. Vijaykumari" (2015) 8 SCC 378, has held:

“9. Therefore, in the present case since the cheque as well as the signature has been accepted by the accused-respondent, the presumption under Section 139 would operate. Thus the burden was on the accused to d