Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Mad) 754

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
K.MURALI SHANKAR, J.
A. Arun – Appellant
Versus
M/s. New Everest Traders, Rep. By its Proprietor, M. Kathiresan - Respondent
Crl.A(MD).No. 114 of 2023
Decided On : 09-01-2026

Advocates Appeared:
For the Appellant : Mr. M. A.M. Raja
For the Respondents: Mr. K. Appadurai

The statutory presumption under Sections 138 and 139 of the Negotiable Instruments Act establishes that the accused must rebut the existence of a debt with credible evidence; mere denial is insufficient.

Headnote:(A) Negotiable Instruments Act, 1881 - Sections 138 and 139 - Criminal Procedure Code, 1973 - Section 200 - Acquittal overturned - Accused failed to establish a probable defense against statutory presumption regarding the issuance of cheque for a debt - Presumption under Sections 138 and 139 supports complainant's claim of liability despite absence of receipt or documentary evidence from complainant - Acquittal based on isolated evidence found perverse. (Paras 1, 6, 37)

(B) Statutory Presumption - Existence of a legally enforceable debt presumed unless rebutted by the accused - Rebuttal requires preponderance of probabilities, not merely denial or absence of response to legal notice. (Paras 12, 36)

(C) Onus of Proof - Burden shifts to accused after presumption of debt established by complainant - Mere absence of direct proof of financial capacity does not negate liability unless the accused provides sufficient evidence to the contrary. (Paras 32, 38)

Facts of the case:
The complainant lent Rs.6 lakhs to the accused, who defaulted repayment, leading to the issuance of a cheque that was dishonored due to insufficient funds. The trial court acquitted the accused based on perceived lack of evidence from the complainant.

Findings of Court:
The appeal resulted in the overturning of the acquittal due to the accused’s failure to rebut the statutory presumption of debt.

Issues: The main issue was whether the accused had sufficiently rebutted the presumption of liability established by the complainant under the Negotiable Instruments Act.

Ratio Decidendi: The court held that the trial court erred in ruling against the complainant based solely on isolated evidence. The statutory presumption places the burden on the accused to prove their defense, which they failed to do.

Result: Criminal Appeal allowed; accused held guilty and fined.

Table of Content
1. overview of the facts of the case. (Para 1 , 2 , 4 , 5 , 6)
2. discussion of the statutory presumption under ni act. (Para 8 , 12 , 18)
3. defendant's claims regarding the cheque and its implications. (Para 10 , 23)
4. establishing presumption and burden of proof. (Para 36)
5. final ruling and penalties imposed. (Para 38 , 39 , 40)

JUDGMENT :

K.MURALI SHANKAR, J.

This Criminal Appeal is directed against the judgment made in S.T.C.No.48 of 2022, dated 07.10.2022 on the file of the Fast Track Court (Magisterial Level), Uthamapalayam, in acquitting the respondent/accused for the offence under Section 138 of Negotiable Instruments Act .

2.The appellant, who is the complainant, filed a complaint under Section 200 Cr.P.C. , against the respondent for the offence under Section 138 r/w 142 of Negotiable Instruments Act .

3. For the sake of convenience and brevity, the parties hereinafter will be referred as per their ranking/status before the trial Court.

4.The complainant's case is :

a) The second accused is the owner of the first accused concern. The second accused had good acquaintance with the complainant for several years. He approached the complainant and requested for a hand loan of Rs.6 lakhs for development of his business and for urgent family expenses, agreeing to repay the same within a period of three months.

b) The complainant advanced the requested loan of Rs.6 lakhs on 01.03.2020. The second accused, by citing Covid-19 and consequent lock- down, was postponing the repayment of loan amount. When the complainant demanded the second accused to return the amount on 16.03.2021, the accused issued a cheque of the first accused concern for Rs.6 lakhs drawn on UCO Bank, Cumbum Branch, dated 17.03.2021 and requested the complainant to present the cheque and get the amount. Believing the words of the second accused, the complainant presented the cheque for collection on 17.03.2021 through his Bank Karur Vysya Bank, Cumbum Branch, but the cheque was returned dishonored as 'funds insufficient' vide bankers memo, dated 18.03.2021. Hence, the complainant sent a legal notice, dated 07.04.2021 to the accused demanding them to pay the amount covered by the cheque, but the accused having received the said notice on 16.04.2021, neither sent any reply nor complied with the notice demand. Hence, the complainant was constrained to file the above complaint against the accused for the alleged offence under Sections 138 r/w 142 of Negotiable Instruments Act .

5. The learned Judicial Magistrate, upon receiving the complaint, recorded the sworn statement of the complainant and on perusing the records, upon satisfied that there existed a prima facie case, took the case on file in S.T.C.No.48 of 2022 for the offence under Section 138 of Negotiable Instruments Act and ordered for issuance of summons to the accused. After appearance of the accused, the accused were questioned about the offence alleged against them and they have denied the commission of offence and pleaded not guilty. The complainant exhibited 4 documents as Ex.P.1 to Ex.P.4. After closure of the complainant's side evidence, when the accused were examined under Section 313(1)(b) Cr.P.C. , they have denied the evidence as false and stated that a false case has been foisted against them. The accused have stated that they are having defence evidence. The defence examined the second accused as D.W.1 and one Tmt.Ganga Gowri and Thiru.Savadeeswaran as D.W.2 and D.W3. The defence summoned and examined Thiru.Vedhajebin, Bank Manager of UCO Bank as D.W.4. and exhibited one document as Ex.D.1.

6. The learned Judicial Magistrate, upon considering the evidence both oral and documentary and on hearing the arguments of both the sides, passed the impugned judgment, dated 07.10.2022 holding that the complainant has not proved the offence under Section 138 of Negotiable Instruments Act as against the accused beyond reasonable doubt, acquitted them under Section 255(1) of Cr.P.C. Aggrieved by the